Condo Conversion
What is a condo conversion? A condo conversion is a change of title from a single owner of an entire project or building to multiple owners of individual units. Not all rental apartments can be easily converted into condominiums. Typically, real estate developers look for buildings in fair or good condition that require little investment in repairs compounded by the ability to sell the units at a price that reflects a monthly mortgage payment equal to the cost of a month’s rent after factoring in mortgage, insurance, taxes and maintenance fees. Because most of the units were occupied by renters prior to the conversion, these condos tend to sell quickly as those renters scramble to purchase the homes that they are already living in. But there are also opportunities for new home buyers to come in, check out the complex and purchase one of the newly converted units.
Condo conversions were popular in the late 1970s and 1980s when high interest rates and rising single-family home prices drove demand for condos. Wanting to build equity but unable to afford single-family homes, buyers opted for condos to fill their needs. A large number of units were converted but as buyers sprawled out to the suburbs in the late 1980s and early 1990s, the demand for such conversions waned. And now they’re back with a vengeance. Condo conversions are all the rage as vacancy rates on apartments rise and homeownership rates increase, spurred on by low interest rates that often leave owners paying less than renters. The trend is prevalent in urban and downtown areas where the physical structures are already in place and demand for downtown living close to work and amenities is high.
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