multi-family housing with zoning issue

I

investorp

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Hi All!
I`m considering putting an offer for a multi-family house in Toronto.Main problem is the zoning. The seller cannot warren that it`s legal so I`m assuming is not.I wanted to back off the deal but the seller is trying to convince me that it`s pretty common in Toronto and etc.Also I`m not sure if I`ll be able to get an insurance for such a property (or make claim)...

However the numbers looks nice positive cashflow, nice area. etc.

Should I stay away?

Thanks in advance!!!
 
brentdavies

brentdavies

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The question to ask the city is: If the property burnt down, can I rebuild an multi family building again" If the answer is no, then you must find out what can be done on the land.

Property that should of been built on RA7 zoned land, (Edmonton), but is zoned RA2, then the answer is no, and the insurance company may not pay out to rebuild. Then who pays the mortgage. Serious questions to ask your insurance company.

But if the single family house on RA7 land, and you are able to use the land for higher and better use, then there is potential. But be careful of the lone wolf property, that no redevelopment can happen due to location.

I would walk away and find something else.
 
housingrental

housingrental

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Brent`s post above is great
I`d give development services at the city a call
They can fill you in on its current status and potential status
You might have a bigger problem also - without any change to structure you could be shut down at any point after closing on it depending on current situation.
 
terri

terri

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QUOTE (investorp @ May 18 2010, 02:34 PM) Hi All!
I`m considering putting an offer for a multi-family house in Toronto.Main problem is the zoning. The seller cannot warren that it`s legal so I`m assuming is not.I wanted to back off the deal but the seller is trying to convince me that it`s pretty common in Toronto and etc.Also I`m not sure if I`ll be able to get an insurance for such a property (or make claim)...

However the numbers looks nice positive cashflow, nice area. etc.

Should I stay away?

Thanks in advance!!!


If the seller does not warrant retrofit status then the suites are probably not
legal. The seller is correct however that there are a lot of illegal multi units in Toronto. That doesn`t
mean however that you will not have problems at some point in the future.
How many units are in the building? How many parking spaces? What
type of dwelling? What neighbourhood? Can you find out the zoning? R1? R2? R4?
Insurance will probably not be your biggest problem, financing will be.
If the suites are not legal, lenders may not qualify you based
on the current rental income, but check that with a mortgage broker.
 
B

Berubeland

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It is very common with apartments in Toronto especially basement apartments. However you run the risk of the tenant calling the city and fire marshal and property standards if your suite is not legal. The deadbeat who will do this to you will also not be paying rent at the time, so.... you will get the joy of spending lots of money while not receiving any income.

Second if you have quite a few suites in one house that was not built to service many apartments you can have problems with hydro unless it was upgraded. For example the 2nd floor kitchen will blow fuses or breakers which are typically located in the basement apartment. They will call you and you will get to go out to the property and enter the basement tenants suite to change a fuse or flip the breaker.

Hot water and water supply can also be an issue.

Thirdly typically you will find very questionable repair & construction work in these kinds of houses and nothing behind the walls has been inspected and is up to code. So there can be very nasty expensive surprises.

Or....... everything could be fine
 
A

Al Verwey

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QUOTE (investorp @ May 21 2010, 06:41 PM) Thanks everyone for your comments!
I decided to walk away...

As a final comment on this thread, I would advise that you should have your real estate agent check on this for you. If he or she doesn`t know how - teach them! They are being paid a big chunk of money and you should expect some legwork from them. If you have given your agent your criteria, then you have every right to expect that they will obtain all of the information you need to crunch the numbers. It`s part of building your success team.

Al Verwey
Penta V Holdings
Newmarket, ON
 
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