I am currently looking in to potential condo-conversion opportunities. Are there any quick-and-dirty formulas to determine if a project may make sense?
I found one property that is 25 units selling for $80K/unit. Similar sized condos in the area sell for around $175k/unit. This is a good location in an area that would allow a conversion to be done. It is also an area where conversion potential properties are still selling at cap rates eqivalent to non-convertable apartment buildings (in other words, the cap rate isn’t lowered since it is convertible which I have seen in many areas).
It seems that all of the condo-conversion properties I have seen are complete overhauls of the property. Is that a requirement? Or, do many find that is the best way to sell the units after conversion? It seems to me getting the conversion done as quickly as possible with the minimum necessary upgrades so it is keeping in with the neighborhood (as opposed to the nicest in the neighborhood) would be the way to go. Is that foolish thinking?
Any caveats or major things to look for in a project would be greatly appreaciated.