Apartment Building To Condo- General Question.
My experience to date only involves residential investments, but I have noticed a few apartment buildings for sale in my area. It seems to me that with the right property and enough cash converting an apt. bldg into condos would be highly profitable especially at what condos are selling for versus the rental market. I know theres a lot involved with setting up a condo assoc. and the importance of accuratly estimating the upgrade costs of the building and units.
Now realizing that this is new ground for me I am interested in what some of you with experience in this feel the pro's and con's are?? Has anyone had great success? Anyone screwed up royally??
Thank you in advance..
The essence of good condo conversion is good good rehab numbers, good pricing and good marketing, and get out quick. The way to loose your butt is to sit with units that aren't selling and aren't cash-flowing because they aren't rented.
commercialking,
Is it possible to be renting some units while you are selling others as condos.
Pardon my ignorance.
Thanks
Yes it is theoretically possible but the difficulties can quickly mount.
Years ago I managed a 300 unit suburban conversion. When I took over the project we were in year 4 or 5 of a projected 2 year sell-out and they had still only sold about half the www.units.Theoretically, then we could have had 100+ units rented. In fact there were about 30 rented units. Fortuantly this turned our to be a good thing. Some changes in our marketing and some improvement in the market in general and sales caught fire and we sold the remaining condo units in about 8 months. Even with only 30 of the units occupied it was still a nightmare getting those people out in time to get their units renovated so that people could move in in a timely fashion.
The second problem with renting units in an on-going condo conversion is that there is frequently conflict between tenants (who have, after all thought of the place as their home for some period of time) and the new owners who frequentlyl look down on these people who are living in the same place they are without having put any money down. Sometimes, when the existing tenants are close to the same economic class as the new buyers these conflicts are minimal. But often one of the things you do when you do a condo conversion is you upgrade the occupancy and these problems can be more intense to the point of negatively affecting the market value of the condo sales.
The best of these kinds of condo conversions is where a sizable number of the existing tenants are able to buy their apartments. If you get just the right building this becomes the ideal situation.
Commercial king,
Thanks for shedding light on the subject--Do you have any recommended reading in this area.
Thanks again
Make sure you get your project approved through a lender that will allow you to close on those units without a presale requirement - otherwise you will wait forever to presell 51% of the project. If you have the project approved, then your buyers can start financing right away.
Pm me if you have additional questions.
Thanks.