Why I Like Condo Conversions
For anyone getting started in real estate investing, condo conversions will be a term that will come up frequently. And what it means is a building that was previously an apartment building, or sometimes even a hotel, is now being converted into condominiums and sold individually. Sometimes this requires extensive modification and upgrades, or if the building is relatively new not much work at all.
Typically a developer, or group of investors with the capital, will come in and buy the development as a whole with the intention of doing whatever upgrades are needed and reselling the individual units.
One of the reasons we often like these condo conversion investments is that their price points are typically significantly less than pre-construction or new construction. For Florida, in particular, there are several factors that make this the case:
1. Florida, as a state, has become more stringent about their land control –even reclaiming land in some areas for preserves, natural waterways, to prevent losing any more of their natural wildlife than they already have, and to help prevent or slow down the natural erosion that would otherwise occur. Their goals actually include reviving some endangered species too. As a result, land prices are driven up
2. 2004 & 2005 provided Florida and our nation with the #1 most devastating hurricane season on record including the #1 most damaging hurricane on record, hurricane Wilma. Not only from a dollar amount of reconstruction needed, but total square miles of devastation and sheer volume and wind speed! As a result, construction costs elevated and remained high with the soon-following nearby Katrina havoc.
3. Florida remains the #1 state for net migration since 2000, beating its closest competitor (Arizona) by more than 2 ½ times! They are averaging almost 600 people per day. Now some of this is due to the beginning migration of baby boomers and splitters (those who go into semi-retirement and get 2nd homes to travel to regularly). But Florida has also maintained its title as the nations #1 state for producing new jobs, bringing a younger work-force-aged group to the sunny state for such strong industries as technology, medicine, education and their service industries. Major employers include Lockheed Martin, AT&T, Walt Disney World, Florida Hospitals, Siemens-Westinghouse, University of Florida, and is one of the nation’s top film and TV production markets. Most credible forecasts predict the Orlando and Tampa regions alone will create at least 120,000 jobs over the next 24 months.
For one example only, a condo conversion I visited in a city in south western Florida had starting prices in the mid 100K range. In that same city there were several new construction condos for sale in similar neighborhoods (within just a couple miles of the conversion) with similar square footage and similar features and their starting price points were, at minimum $70,000 higher. This is why it is our focus for the buy and hold mentality in strong rental markets.
~ Alex Anderson Specializes In Helping People To Build Wealth And Prepare For Retirement With Florida Investment Properties That Are Located In Appreciating Markets.
