Apartments converted to condos

[Toure Lee]

Hello everyone,

If an apartment building has been converted to condos and the HOA ownership is retained by the seller, the buyer of the property (the package of converted units) earns money by raising rents or by parting out the units for sale. If the rents are under market, raising them does not increase the property value because each condo has its own parcel ID-correct? I havent seen any appraisal info or comps from the seller for the individual units. Just trying to figure out if there's an opportunity with this particular property. NOI=131K. CAP=7.5. The gas and water are paid by the HOA. Welcome any comments on how to analyze this property.

[Account Closed]

Lots of issues so I am not sure the following applies but here goes our experience with these type deals.

1. very difficult to finance unless you get all the units.

2. if you have all the units, then there is no real HOA so i do not understand you comment regarding the seller keeping the HOA ownership.

3. if you are only purchasing a portion of the total units, you are really only buying a bunch of SFR at one time. Most states control/protect the other owners under the HOA so that you really do not have a control on most cost.

4. Many investor owned projects no longer qualify for fannie and fha loans if more than a certain percentage is investors owned.

5. THIS NOT A MULTIFAMILY deal if you are not buying all the units. IT IS A PORTFOLIO purchase. As such you may gain some economies of scale but you really are buying individual properties and your strategy should be similar to any SFR purchase.

6. I would be very hesitant if my strategy was to ultimately acquire all the units because there will always be holdouts that may spoil the plan.

7. Lastly, if the seller is the developer, you need to get a copy of the HOA board minutes because there may be many undisclosed issues.