Have you decided to start as a real estate investor? This is your moment and I'm going to tell you how can you do that! It is really easy, whether you buy houses and rehab them or you invest in a condo conversion. Dan Case, a real estate investor in condo conversion, is willing to tell us what a condo conversion is. According to him a condo conversion is an apartment complex. The ones built in the last 5 or 10 years. They kind of have the condominium theme because there's not a lot of distinction between an apartment complex anymore and a condominium. These condo conversions are a good opportunity and the main reason is the cost. If you start building right now the materials are very expensive. A developer recognizes this thing and it is better for him to buy an existing building. Another good thing about a condo conversion is the place where they are being sold. Typically there is a strong growth market area . The investor doesn't have to worry about losing tenats as all these are already occupied.
There are a couple of things you have to know when you buy tenant occupied. You take over the existing lease. If you don't like being a landlord then certainly you'll enjoy pre-construction much better than condo conversion. There's a lot of work that goes with landlording or management of a property and it's understandable why many people don't want to manage tenant's. When something is converted take into account the renovations. These depend on the age of the building. Dan explained to us that sometimes they just repaint it. In some cases they replace the balconies. In some other cases they add a lake gazebo or a nice picnic place. In fact the developer will redo the landscaping. This renovation doesn't take into account only the exterior but the interior too. They paint the walls, add new carpets, sometimes new lighting or even new kitchen or bathroom so the conversion seems like a brand new unit. You get something new and what you have to do is to find someone to occupy it. There are also some custom additions and they go up to $ 1,000 standard meaning that you can choose the colour pattern you like, different types of lighting, and other options.
On a condo conversion there is typically a 5% reservation fee and this represents 5% of the sale price. Condo conversion one bedroom, one bathroom sell for around $150,000 while two bedroom, two bath is $180-200,000 in the Titusville, FL area. And on a condo conversion you don't have 12 to 18 month built time. As soon as you get the contract and have the exact sales price you call the inside lender.
Most of the condo conversions have an onsite lender. You need to talk to them but also talk to your own personal financing person just to get a comparison. You can buy a home as a primary residence or as an investment property and another as a second home. You may wonder what's the difference? The difference between the investment loan and the second or the primarily home loan is the payment. Investment loans typically require 10 %. There are a lot of mortgage companies that can do investor loans up to 100% . The difference is the prior interest because is an investment loan. You need the ability to treat it as the second home meaning 15 miles outside your primary residence. When you are buying as a second home you get the best policy and a second home only requires 5% versus 10% on the investment property. You are allowed to have multiple second homes but they don't have to be within 50 miles one another. For example, Dan has a home in Orlando as a primary residence, one in Orlando as an investment and another in Daytona Beach as a second home.
For the new investor the condo conversion is the right thing to do because of the limited amount of money out of pocket and the ability to have a place that you can rent out realistically. Make sure you are in a strong land market regardless so if you are buying a condo conversion or a new construction because you might have to carry a mortgage for certain time before you can sell it .