Valuations of Condo Convertable TIC Units – What is There to Gain?

October 2, 2023

A great way to build some significant equity quickly is to convert a TIC unit(Tenancy in Common) to a condominium. If you aren’t familiar with TICs you should read Jennifer’s definitive blog post on the subject by clicking the link below before reading this article.

What’s Wrong with TICs? In a Nutshell….

Let’s say you are considering purchasing a TIC which is condo convertible. How much equity would you estimate you would gain by going through the process? Keep in mind, under the current city rules, the only TIC’s which are convertible are 2-unit buildings where each unit is the primary residence of the owner. We recently had a transaction that was exactly that. A lovely 2-unit building in the Richmond District, where the upstairs unit had recently been purchased by a young family, and my client, a young family as well, was interested in purchasing the downstairs unit. While the price of the unit was quite appealing, the client wanted to know that they were making a good investment, as anyone would.

One of the key skills of a good Realtor is creating an accurate price analysis. On the Rosdail team, all of our agents are trained in this area in order that our clients can be successful in competitive situations without overpaying to get the home they want. The price analysis is an important part of our process and we consistently provide one for our Buyers before they submit an offer.

In this situation, I wanted to determine what the value of the home was with its current TIC status, vs. the potential improvement in value once it was converted to a condo.

To do this I compared the sales prices of condos and TICs in only 2 unit buildings, as these were the only buildings relevant to this type of transaction. I wanted a large sample to avoid any anomalous spikes, so I compared properties city-wide. Using this method. I was able to determine the average sale price per square foot for the condos vs. the TICs. The difference was 11.7%.

Understanding the value difference of TICs and condos also proved particularly helpful in establishing the value of this property, because there were very few comparable sales of TICs in this Neighborhood. However, there were many condo sales in 2 unit buildings. So using the condos, I was able to estimate the value of the unit once condo converted, and then back out the value difference to the TIC value.

Perhaps you are wondering how accurate the valuation was that I provided for my clients. Well, less than 2 weeks after having our offer accepted, we received the appraisal report from a licensed appraiser, and their valuation was less than $1 different than what I had provided my client.

Who you choose to work with as your Realtor matters, and the Rosdail Team is committed to helping our clients build happy homes while building wealth for their families.

By: Michael Bilger