Over the past few years, investors have been buying apartment complexes and converting them over to condos. In a nutshell, here's how it works. The investor buys an entire apartment complex and applies to the city to convert it to condos. They then give notice to the tenants, who usually get the option to buy their home or move out within a set time period. The new developer then will redue landscaping, pools and community areas. They'll start to redue units in blocks. They might break up the community in sections and keep renting to most of them and redue one section at a time. Therefore, when you want to buy a unit, you'll have to buy in the section that they currently are working on or wait.
Eventually, all the sections will be redone and the community will be completely turned over to home owners or investors.
Here's some things to think about when buying a Condo Conversion.
- Is it a new project? Or is it close to being sold out? You take the risk that a new project will convert back to apartments. If they have to sell 300 units and have only sold 5 in 6 months, some investors have chosen to revert back. Will you have to worry about this.
- Are there fire walls or noise reduction between the units? Buildings built as townhomes or condos usually have these features. Not all apartment complexes do. Is your condo conversion built well or on the cheap?
- Is it mostly owner occupied or investor? If you buy in a community with mostly investors, arne't you really buying into an apartment community? Will you have trouble securing a loan when it's mostly investor owned and will you have trouble selling down the road for the very same reason?
What other unique things do we need to think about when buying a condo conversion? Please leave a comment and we'll update this post as needed.
Thanks, Pat
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