A Primer on Condo Conversions
In order to make money in the condo conversion world, it really does pay to be discriminating. In some projects in Broward county, the converter tries to make all the money, leaving the purchasers with little more than an at market cost home. No discount at all! What good is that? You might as well just buy a property listed on the MLS.
Let me back up a little. For those of you that have never purchased a condo conversion, here are some of the ground rules. Firstly, current tenants have the right of first refusal when it comes to purchasing their unit. They have a 45 day window from the time they receive notice that the property is going to be converted to condos. They can choose to do nothing. That means they vacate or renegotiate their lease with new owner at lease expiry. Secondly, they can decline buying a unit. Thirdly, they can either choose to leave at the end of their lease or purchase their unit. The current tenants will almost always get the lowest price. Typically about 10-15% of tenants will purchase.
The next phase (normally conducted after the 45 day window has expired) will comprise of end users and investors who get to buy at a VIP event or at a lottery. The final phase of the conversion is selling the units that were under contract but became available again. The reason this happens is that by law there is a 15 day right of recession that all purchasers of condo conversions receive. Also, if the project did NOT sell out, then the marketing company handling the conversion would sell remaining units. After that it's just a matter of waiting the typical 30-45 days until closing. Some projects close later.
In my next post I will describe a recent very profitable condo conversion project and how it can be duplicated on other conversions. Please contact me if you would like more information on my next condo conversion!
Let me back up a little. For those of you that have never purchased a condo conversion, here are some of the ground rules. Firstly, current tenants have the right of first refusal when it comes to purchasing their unit. They have a 45 day window from the time they receive notice that the property is going to be converted to condos. They can choose to do nothing. That means they vacate or renegotiate their lease with new owner at lease expiry. Secondly, they can decline buying a unit. Thirdly, they can either choose to leave at the end of their lease or purchase their unit. The current tenants will almost always get the lowest price. Typically about 10-15% of tenants will purchase.
The next phase (normally conducted after the 45 day window has expired) will comprise of end users and investors who get to buy at a VIP event or at a lottery. The final phase of the conversion is selling the units that were under contract but became available again. The reason this happens is that by law there is a 15 day right of recession that all purchasers of condo conversions receive. Also, if the project did NOT sell out, then the marketing company handling the conversion would sell remaining units. After that it's just a matter of waiting the typical 30-45 days until closing. Some projects close later.
In my next post I will describe a recent very profitable condo conversion project and how it can be duplicated on other conversions. Please contact me if you would like more information on my next condo conversion!
posted by Steven at 11:45 AM
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