CONDOMINIUM CONVERSION: THINGS TO CONSIDER
Following the real estate decline in 2008, we saw a decrease in homebuyer confidence and a surge in the rental market. For property owners possessing multi-unit complexes and cooperatives, this was a positive, welcome shift.
Units were full and rental rates slowly began to increase with demand, proving valuable to the apartment development owner. Over the past five years, however, the market has slowly been improving. As renters realized mortgage loan rates and home prices were remaining low, many decided to make the transition from leasing to owning.
For the landlord in possession of several apartment units, loss of revenue ensued. If you’ve found yourself in this position, what are your options? Continue spending out of pocket for marketing and advertising to fill your units? Increase the rent further to compensate for vacant apartments?
If you’re asking yourself these questions, it’s an ideal time to consider condo conversion – turning your complex into condominiums offers several benefits, despite the initial challenges the process entails.
UNDERSTANDING STATE AND LOCAL LAWS
State and local governments have laws and regulations in place dictating the condominium conversion process. Permits are required, often from multiple departments within several levels of government, and specific steps are mandated.
This can be daunting at first, but working with an experienced real estate company and seeking assistance from the proper professionals, such as real estate attorneys, is instrumental in this early phase of condo conversion.
MANAGING CURRENT TENANTS
Once you’ve made the decision to covert your multi-unit property into condos, you’ll need to properly manage current tenants. This includes providing them with ample notice of your intent to remove the option for renting. Many property owners offer current residents the choice to buy, sometimes with more favorable rates and prices. Those who don’t select to purchase, however, will often inquire about relocation assistance. Some governments require landlords to offer this form of help as remediation.
BENEFITS OF CONDO CONVERSION
While condominium conversion can be complicated, it offers many benefits to the property owner. Condominiums have higher market value than a cooperative complex, and the terms for financing are almost always more favorable. Associated maintenance fees are typically less because of the underlying mortgage, and these lower fees also help to increase market value.
The homeowners association that will collect HOA fees helps to replenish reserve funds and build a cushion for future improvements and projects.
You’re starting fresh. New rules are put into place and new documents drawn, making it an ideal time to address any preexisting errors, outstanding fees or problems with the setup of your current, multi-unit complex.
Many landlords see owning a cooperative as a long-term investment, one that will yield constant return on investment. The truth is, real estate is unpredictable and it’s impossible to predict an up or downswing in the volume of renters.
Condominium conversion offers you the opportunity to increase your property’s market value securely without losing time and money already invested. If you’re interested in condo conversion and would like to learn more, Atlanta Fine Homes Sotheby’s International Realty experts can help.