Sloans Lake RE Trends: Condo Conversions

By
Real Estate Agent with Your Castle Real Estate

Investing in Real Estate 8 - Condo Conversions

This blog will discuss a type of real estate investment, fix and flips, in the Sloans Lake area in Denver.

 

What this investment is:  A synthesis of the fix and flip and rental operations - purchasing an apartment building in a neighborhood dominated by owner occupants, then converting the building from apartment building to condominium.  Often requires renovation of the units to meet the expectations of owner-occupant buyers in that area.  Complex and time consuming, but has wonderful tax advantages compares to fix and flips and often has superior returns to all other asset classes.  Ideally suited for the sophisticated investor with extensive experience. 

 

Equity needed:  Being able to document your income and your assets will be critical.  For a commercial loan, your net worth should generally be at least as much as the loan you are seeking.  The good news is that the commercial loan usually does not show up on your credit report, so it doesn't count towards the "four investment home limitation" from Fannie / Freddie.

 

Importance of credit:  Essential.  A 720 FICO is a must.  A 740 would be better.

 

Importance of experience with contractors:  Critical.  If you have never done it before, start with an easier "paint and carpet" project to build your skills.  The more sophisticated the project, the better your contractor management skills must be to make money.  Not surprisingly, the simpler projects have lower profit margins than the complicated projects.  Make sure you can take the time to really focus on the project.  We run classes on how to do this from time to time.  Go to http://www.yourcastle.org/events.cfm to see when the next session is.

 

Important of experience with property managers:  Not important; the majority of our clients manage their own rentals when they get started.  Ideally you will have started with some smaller investment rentals and built property management experience.  Now, when you have to finally manage a property manager, it will be easy since you have done the job yourself in the past.

Comments (3)

Marcy Moyer
eXp Realty of California Silicon Valley Probate, Trust, and Investment Sales - Mountain View, CA
Probate, Trust, and Investment Specialist

Elizabeth,

Great explanation. In our area, the biggest issue with condo conversions is that there needs to be enough parking in the conversion to be equal to current codes. In some cities it is not too onerous, but n others, like Sunnyvale Ca you need to have 4 parking spaces per condo.

Marcy

Dec 30, 2008 01:34 PM
Will Nesbitt
Nesbitt Realty at Condo Alexandria - Alexandria, VA
Nesbitt Realty is a family-run brokerage.

Wow! This is highly valuable information.

Feb 10, 2009 09:18 PM
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Creative Visions - Surprise, AZ

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May 29, 2010 10:51 AM