Condo Conversions
The past few years has seen a boom in condo conversions, which
allows buyers to generate cash-on-cash returns within a short
period of time. This, in turn, allows prior apartment owners to
cash out at the top of the market.
The condo conversion craze began with the low interest rate
affliction that was crippling apartment fundamentals. Condo
developers were willing to pay a premium to buy and turn rental
properties into condos.
The cash-on-cash returns that successful condo sales can
generate are between 15% and 30% or more in a matter of months.
Another benefit seen from condo conversions is the creation of
more affordable housing in areas famous for steep single-family
home prices.
Condo conversions can be a double edge sword, however, as
conversions likely will hurt most rental markets. While condo
conversions benefit multifamily owners by shrinking the supply
of apartments, condo buyers are typically renters, so
conversions won't necessarily lead to a jump in occupancy rates.
In fact, some conversions directly compete with apartments
because they end up as rentals. Also, many renters currently
living in an apartment when it is bought and turned into a condo
cannot afford the price of the condo. They are left searching
for a new place to live. If they can afford to stay and choose
to buy the condo, they are most often offered a much cheaper
price than outside buyers.
Despite any controversy that condo conversions have created in
the real estate market, it is still a smart, beneficial way to
invest in real estate.
To learn more about condo
conversion loans visit Security National Capital.