Home Buying in Philadelphia>Question Details

Shawn, Other/Just Looking in Philadelphia, PA

Grandmother wants to sell me her 2 unit rental. Can be turned into a 3 unit for $10,000-$15,000.?

Asked by Shawn, Philadelphia, PA Mon Nov 14, 2011

She is willing to quick claim deed the house over to me for no money upfront. Since this will be my first home and my first owner occupied rental investment should I get a hard money lender to front me the $15,000 to add the additional rental unit, then have the property reappraised with the additional renter already in place or should I get a mortgage first and then do the renovation?

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14
Hi Shawn,

Many good answers belo9w with solid information already. You definitely want to check the zoning file on the property. You may or may not need to go before the zoning board to seek a variance. Duplex to Triplex usually isn't a problem as long as you have the required lot space and the neighborhood association won't try to block you.

You may want to try to get a streamline FHA 203K refi. Once you own the property, you can refi it right away with proper credit qualifications. Just wrap up the renovations into your FHA mortgage. You should contact a reputable mortgage lender who has experience with FHA 203K loans.

Please feel free to call me anytime if I can be any further assistance. Good luck with everything.

All the best,
Larry Lichtman
REALTOR, Property Manager
Your Real Estate Resource For Life
Cell/Text: (267) 254-7994
Web Reference: http://www.DJCRE.com
2 votes Thank Flag Link Mon Nov 14, 2011
Note: a 3 unit will require a hard wired fire alarm system
1 vote Thank Flag Link Fri Dec 9, 2011
Dear Shawn:
Before you acquire the property, you will need to get a zoning approval for a three unit apartment house otherwise, you will be in violation of the zoning code. You should have an agreement of sale prepared that is contigent on getting a zoning change to three units. Typically this can several months to get a zoning change.
Once you obtain a zoning change to three units,than I would advise buying the property. As a certified appraiser, if the property does not have the proper zoning,this can affect obtaining financing. Simply put lenders do not want to lend on properties that are not legally zoned because of the risk. Talk to your grandmother and tell her that you want to do an agreement of sale with a zoning change in order to protect everyone's interest and not create unnecessary problems down the line. Best wishes, John Szymanski 215-888-3162 (cell)
1 vote Thank Flag Link Fri Dec 9, 2011
You will have to check the zoning on this property,usually if it is already zoned a duplex as long as you have the space and permission from your neighborhood association you should be set,everything is a process so do not get discourage, the city could be slow moving,check your L&I office its listed or go on phila.org and follow the steps.
1 vote Thank Flag Link Tue Nov 15, 2011
Even though this is your Grandmother be smart and get title insurance you never know what has happened with the title business is business and family is family never mix the two. This could affect the sale of this property when you go to sell it.

Philip J. Cunningham Sr
V.I.P. Realty Inc.
215 725 5700
Web Reference: http://www.GreatPaRE.com
1 vote Thank Flag Link Mon Nov 14, 2011
Of course you should check with zoning first. Next, go to https://www.annualcreditreport.com/cra/index.jsp from the Federal Trade commission to get a free credit report. Armed with the information about your credit and zoning laws, you can then talk to lenders. While they cannot make a loan to you based on the credit report you pulled, they can talk ball park numbers to help get you on the right track.

If the Board of Zoning will allow a conversion to a triplex, then check into a 203K renovation loan. Sometimes the fees seem high, but compared to a refinance they can be very reasonable.

Also, check with at least one local credit union to see what they have to offer. Their lending policies and programs are different from a mortgage broker.
1 vote Thank Flag Link Mon Nov 14, 2011
By all means-first check the zoning !~

When you say no "Upfront money" exactly what does that mean. Is Grandmom going to hold a first mortgage or is she giving you the property? Or is she discounting the value wherein you finance with a "Gift of Equity"?

Grandmom should sign a special warranty deed. Why use a quit-claim? It may pay to buy title insurance as when you go to sell issues may arise from during Grandmom's ownership-such as a Death Certificate for Granddad, Etc.

Lots of questions here.
1 vote Thank Flag Link Mon Nov 14, 2011
Shawn first check zoning on the property and make sure that it can indeed be turned into a triplex. You can check with various lenders about doing a rehab/construction loan and comparing that with a hard money lender. Again it also depends upont credit and cash reserves etc.
1 vote Thank Flag Link Mon Nov 14, 2011
That may be the best decision. You most likely will have a hard time getting a variance as you do not have a "Hardship".
0 votes Thank Flag Link Fri Dec 9, 2011
Good to know about the fire alarm. Emailed the zoning board and this is what they told me:

The property is zoned R10 A residential which under this classification does not allow for a three family dwelling so you should first go to the Municipal Services Building 1401 John F Kennedy and submit an application for a new use registration permit for a three family then you would pay a processing fee and the zoning examiner would send you a refusal in the mail and then once you receive the refusal you would go to the zoning board of adjustment located at the 11th floor of the Municipal Services Building 1401 John F Kennedy Blvd and you bring in your refusal and pay a processing fee to schedule a hearing before the Zoning Board of Adjustment and they would give you posters to post outside the property and after the hearing they would determine whether to grant a variance or not for a three family dwelling.

I think my best bet might be to combine the second and third floor together and make it a bilevel apartment instead of doing a seperate third floor apartment.
0 votes Thank Flag Link Fri Dec 9, 2011
Dear Shawn:
Before you acquire the property, you will need to get a zoning approval for a three unit apartment house otherwise, you will be in violation of the zoning code. You should have an agreement of sale prepared that is contigent on getting a zoning change to three units. Typically this can several months to get a zoning change.
Once you obtain a zoning change to three units,than I would advise buying the property. As a certified appraiser, if the property does not have the proper zoning,this can affect obtaining financing. Simply put lenders do not want to lend on properties that are not legally zoned because of the risk. Talk to your grandmother and tell her that you want to do an agreement of sale with a zoning change in order to protect everyone's interest and not create unnecessary problems down the line. Best wishes, John Szymanski 215-888-3162 (cell)
0 votes Thank Flag Link Fri Dec 9, 2011
good luck...the issue of being approved is long and isn't free. good luck with the work
0 votes Thank Flag Link Tue Nov 15, 2011
Thanks everyone. I will defintely check with the zoning board. Fortunately, for me my aunt is head of our neighborhood association so it shouldn't be a problem getting it passed through the neighbors. Also, the house does not currently have a mortgage on it. The house was paid off years ago. I'm not getting the house for free my grandmother is just willing to deed it over to me without me having to give her money upfront. I will also look into doing a gift equity and title insurance. I thought about doing and FHA 203k but my credit is only a 640 so I wasn't sure if I would qualify for a loan with FHA. My thinking was if I did the renovation first and then got a mortgage the house would be appraised for higher and that would make the bank be more willing to give me a loan. I'll keep you guys/girls updated.
0 votes Thank Flag Link Tue Nov 15, 2011
Shawn,

Tread lightly. Zoning might not allow, and you'll almost certainly need building permits. Dont folliw the process and you may have legal trouble with the city AND be unable ti refinancw because of it.

Even if you walk the line, still no automatics here. Youll need to hold 6 months, appraise for value, borrow the percentage you need (ltv). Your incime and credit must suport the loan, and the rent you get will not count as income until youve been a landlord 2 mayve 3 years.

Not saying don't. Am saying do your homework... Or lookout.

Call pros - realtor & MOTRGAGE. Go thru your specifics

Best
John leonard
Long & Foster

Jo
0 votes Thank Flag Link Mon Nov 14, 2011
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