There are a couple reasons that not many 2-4s have been converted to condos. First of all, 2-4s are still classfied as residential properties for mortgage purposes, meaning that owner-occupancy is still a likely factor in the purchase and income is secondary. The “residential” status afford these properties access to favorable residential lending rates on the mortgages – the difference between residential lending programs and non-residential (which includes anything other than 1-4s) is substantial. The easier and cheaper credit access has an effect on the sales prices – does that theme ring a bell? So the irony is that 4-unit properties are often priced higher than 5 and sometimes even 6 unit properties with otherwise similar attributes.
Anyways, what I’m getting to here is that in terms of maxing your profit, you would have been better off finding one of the non-residential (5+ units) projects for conversion. You make your money when you buy.
The second thing is that it’s hard to imagine your profit potential as a 4-plex with the condo map being anywhere close to the retail value of the 4 units. You need to take the fact that you’re living in one of the units out of the profitability equation. Selling the other 3 units at a lower retail price right now may not result in your unit being paid off (it might have if your project was 5 or 6 units), but you’ll still come out of it with a nice head start.
The volume of activity for 4-plexes has dropped even more than it has for single family residences, and I see no reason for that trend to turn around any time in the near future. Unless you’re selling at a price where those units can come close to a break-even on the debt service after expenses or you can find some investor who thinks they can succeed where you’ve failed, your property may very well just languish on the market. If the pricing for houses is levelling off or in decline, the same is going to happen with apartments, too.
