Are Condo Conversions A Good Opportunity?
I recently was in a discussion about the merits of looking at condo conversions, which mostly means that apartments are being converted into for-sale condominiums. The process would typically include the processing of a condo map through the local jurisdiction, some level of exterior and interior upgrades, and a home sale process.
From what I have seen over the years, these condo conversions require some precise timing. Apartments most likely have not been designed with floorplans or square footage to be competitive with condo projects that were conceived from the beginning to be for-sale product. It seems, therefore, that apartment floorplans may be marketable once a housing market has become red hot and these conversions can be priced below traditional condo floorplans, yet still drive a decent project profit.
Where the timing seems to be critical is that you need to wait for the market to get pricey and then sell out all of your conversion units before the market cools off. If you are purchasing an apartment project of 150 – 200 units, you have the risk of not selling out your project before the market softens and the traditional condos now are priced at the same level.
It does not seem that many homebuilders look at the condo conversions as a land acquisition opportunity, but rather it might be small builders and developers who have historically approached this development product.
Please share with us below any of your experiences, comments, and questions.