Condo Conversions – How to Succeed in a Changing Real Estate Market

In the commercial and residential real estate investment market condo conversions have become a controversial topic. Many experts say there are still profits to be made with condo conversions, while others assert that condo conversions are high risk and potentially lead to big losses. According to a January 16th, 2007 article in the New York Times, Buyers Scarce, Many Condos Are for Rent, written by Vikas Bajaj, “Since the middle of 2006, the frenzied condominium market here and in several other big cities like Las Vegas, Miami and Boston has collapsed.” “Once roaring sales have slowed to a trickle, sparse inventory has mushroomed into a glut and soaring prices have flattened out and started falling,” Bajaj continues, “In many cities, banks have significantly scaled back loans to condominium builders. Some have demanded that developers sell half or more of the units in a building before even beginning construction.”

Many condo conversion projects have reverted back to apartments due to slow sales. Often referred to as “repartments”, these projects leave large holes in the pockets of investors who didn’t do their homework before construction began. Although condo conversions are high risk, if an investor thinks carefully, completes research on the local region and investigates the potential buyers most prominent in the market profits can still be made.

Real Estate and Affordable Housing: The American Class War

The United States of America was built on the sweat, commitment and integrity of the working class. So why is it so hard for fire fighters, police officers, nurses, teachers and average Americans in general to buy real estate for an affordable price? As the United States economy shifts and changes, the middle class continues to shrink. Increasing health care, real estate, education and utility costs often exceed a typical middle class income. Working class people employed in the city can’t afford to live or purchase real estate in the city, yet as gas prices rise commuting becomes more difficult. Many of the companies who have recently invested and lost on condo conversion projects were overly focused on the luxury market. Condo conversions can be built with more affordable prices in mind if the property is chosen correctly and the plan is designed with working class buyers in mind.

Economic Growth Means More Opportunity for Everyone

It doesn’t make good economic sense that people who risk their lives to protect the public, teach our children and nurse us back to health should have trouble finding homes they can afford. Condo conversions can create affordable housing available to working class families, especially in areas where single family home prices are too high for middle class residents. Investors interested in selling condos to the working and middle class have a great chance of being successful if they buy the right property, in the right location, where affordable housing is a necessity. Savvy commercial and residential real estate investors have the power to make condo conversions part of the affordable housing solution rather than a problem. All it takes is the creativity, knowledge, planning and the courage to think outside the box.

Tips for Condo Conversion Success

One of the keys to making a successful and profitable condo conversion investment is research! Don’t invest in a property you plan to use as a condo conversion without following these tips:

Tip 1. Learn everything you can about the area where your property is located. Find out the local standard of living and what resources are in close proximity such as hospitals, schools, shopping centers, etc.

Tip 2. Explore the various target markets you will have for your units. Who are your potential buyers? What is their lifestyle? What kind of properties and perks are they searching for? When marketing a condo conversion property think carefully about your niche markets. First time homebuyers, single mothers or women and retiring baby boomers often search for condo solutions because they are safe, easy to maintain and cost less.

Tip 3. Consult a professional. Make sure you fully understand the local zoning, permit and construction laws. Do your homework and don’t make any decisions until you have all the information to consider.

Think Outside the Box with Condo Conversion: Commercial Investment Options

If you invest your money in a project that is smart and has appeal to the community your condo conversion project has a better chance of success. In addition to these tips consider rehabbing the property and creating both residential and commercial floors. A condo conversion investment can be more profitable if residential space is sold on upper stories while first floor property is sold as retail or office space. Also consider offering lease to own options to buyers. If you think creatively about your condo conversion investment you will discover all the possibilities. If you are looking to buy a conversion property educate yourself as much as possible before you purchase. The real estate you buy with condo conversion in mind must be well suited for this kind of project.

Real Estate at a Glance

Real estate is defined as doing business over land from housing and apartments to bringing up educational institutions, business establishments and for other purposes. Driven by factors like comfort and luxury, the common man has grown his thirst to make possible his dreams. Their thirst is pacified by aesthetic architecture of the buildings that promises of ultra modern lifestyle in a profound manner. However the land chosen should meet all the parameters from all perspectives. The businesses dealing in real estate differs from country to country. Occasionally it is supposed to be synonym with real property where the piece of land is improved by building fences, walls and apartments. ‘Vastu Sastra’ is also often taken into account while going for real estate, which is held accountable for a man’s health, wealth and prosperity.

In this field, Pune for example is one of the fastest growing city in many terms. It is in the outskirts of Mumbai and is very comfortable to live there in terms of climate. Cities like Bangalore, Pune, Noida also hold in them cosmopolitan nature where people from nearly all places have migrated for better prospects. With modern facilities and amenities, these cities are one of the fastest growing in terms of mushrooming of educational institutions and software industries. Further, these places also have high demand of Residential projects, Commercial projects, Office projects and Bungalow projects that have been taken into account and given due shape to make the dream of making it big in life come true.

The comfortable and amiable climate has also made people to mingle with the working culture of these cities. These cities make the place ideal to do business and hence render an opportunity to grow. With abundant green coverage and right proportion of population the cities are ideal place for the growth of real estate business. Here, the demand and supply values also go in hand in hand. This business is mushrooming and flourishing in the city, the available infrastructure is also getting better and better day by day.

The cities have prospered and so are its neighboring places which have given a boost to the demand of real estate. The demand is also gaining wide popularity because of low rates of interests provided by banks, keeping money in fixed deposits, stock markets variation and the huge returns on mutual funds. Further, the demand of real estate sector has also sky rocketed because of initiatives taken by Indian government which has allowed 100% FDI in the construction and development sectors.real estate property, commercial and residential property

Today, customers have a wide range of choices in real estate in terms of 1/2/3 BHK flats, classy malls, posh residential buildings and complexes, large multiplexes and 5-star hotels. These facilities & amenities have come up in the cities that offer a thrust to the real estate and a chance to blossom from the budding one.

A lucrative business, the upcoming changes in the Real estate business at the same time has also worked towards the benefit of the people to meet their demands of standard of luxuries and comfort levels.

What is Your Real Estate Investing Objective?

What is Your Financial Objective?

There are 2 primary motives for investors. First is immediate quick return on investment. Next there is the long term cash flow and appreciation strategy. Which ever method you prefer will dictate the type of property you invest in.  Short term or long term that is the question. There is no right or wrong answer it is just personal preference.

Short Term Real Estate Investing

Infamously known as property flipping an purchase of real estate for the expressed purpose of immediately reselling it for for profit is known as flipping. There has generally been good profit in short term and this investment strategy has been the subject of many late night infomercials. This is the reason there are so many property flippers today. A lot of them were burned in the recent financial markets melt down. The premise in property flipping, as in all investing, is to buy low and sell high. Flippers rely on values appreciating or even remaining steady as they purchase distressed properties below market value. Flippers are also dependent  upon mortgage money being readily available to their end buyers. As property values decreased and lending tightened many flippers were left holding properties that they could not afford. Some sold properties for a loss and others walked away leaving the property for the lender to deal with. This happens when investors are under capitalized, without a solid exit strategy. Potential risk increase as potential reward increase, especially for short term investors. This is a little better than trading in the commodities markets where risk and reward are very high.

Long Term Cash Flow and Appreciation

The opposite of short term is long term. The goal is to still buy low, yet those who chose to hold for cash flow and appreciation have a different outlook on the property they purchase. They are looking as owners, not renters. They want to make sure the property is in good shape both now and in the future. They would rather invest in materials and systems that last and provide the lowest long term cost versus the cheapest purchase price. When it comes to renovation and rehabilitation of the property the investor who has a long term outlook will want to have the work done right with good quality so they do not have to do it again over and over. Ultimately the long term real estate investor is also more concerned with long term financing as well. A investor with a short term outlook does not care about interest rate because they will not have the loan for a long time. They are more concerned with points, fees and prepayment penalties as they have a direct impact on their short term return on investment.

Final Consideration

Whether you are looking to hold your property for the long term for cash flow and appreciation or you are looking for an immediate return on your investment will dictate your real estate investment strategy. Once you determine your strategy everyone on your team  needs to be aware of your goals. Your team would include your Financing Specialist, Contractor, Attorney, Realtor and Accountant. When everyone is on the same page then your plan will work at its best.  Just choose your strategy, establish a long term game plan, share the plan with your team and stick to it to make it work.