Condo Conversion: Popularity And Prospects

From Buyincomeproperties.com

Condo Conversion
Condo Conversion: Popularity And Prospects
By BuyincomeProperties.com
Jun 7, 2006, 16:00

For the last few decades, condominium conversions have been a craze among real estate developers and investors. Huge numbers of people are engaged in condominium business and they are getting rich. In addition, buyers are also enjoying the benefits of having their own house at a very affordable price than paying rent every month. However, some people believe that it is the end of the Condo boom period. The reason is that they are afraid of the increase in mortgage rates in recent years. Let us examine, what are the prospects of condominium conversions in the coming years and how do the recent trends affect its popularity.

Condominium Conversions: The Popularity
Most people prefer owning a condominium rather than paying rents every month. The main reason is that this way they can save a lot of money, as they just have to make an initial investment and they get rid of paying monthly rents. Moreover, the overall prices are very low and undoubtedly affordable. However, there are certain things due to which some buyers hesitate to go for condominiums, such as the privacy factor. If the buyer wants to maintain his/her own lawn and garden, and other amenities like pools, condominium units are not for them. That is why they prefer single home ownership. Still, there are huge numbers of buyers, who do not mind the presence of neighbors, and in fact, they love the active participation in community events. Now, if we see from the point of view of investors, we find that in the form of condominium conversion, they have got an inexpensive but much more effective way of increasing their bank balance. However, they have to pay a premium for the properties. Still, this does not discourage them because the overall cost of purchasing an apartment and turning them into Condos by renovation is far less expensive. That is why they do not mind paying a premium for properties. Moreover, it is very easy to find buyers for their Condos and to convince them to buy the same. This is where, eventually, they get huge return that not only covers their expenditure for the premium but earn them more than they could have earned by other means of real estate business.

Condominium Conversions: The Prospects
Given the rising interest rate environment, it looks like buyers would not be able to get mortgage at low interest rates. This might make the condominium units unreachable for a common buyer. Affordability of price was the biggest advantage with condominium units, but if the price becomes unreachable, how will the converters sell their Condos? Thus, not only the buyers will lose a great opportunity of owning their own house, but even the converts will also face a big loss. They might have to rent the unsold Condos as a last option to retrieve what they have invested. The renovation of the property costs much. Therefore, in such cases they might also have to bear losses. Eventually, this may force them to stop turning apartments into Condos, and investing in the renovation of the same. It clearly means the end of the Condos conversion boom. However, most converters and real estate developers do not take it as a threat to Condo conversion business. They claim that even if the mortgage rates increase, it will not stop the buyers from purchasing Condos. They strongly believe that nobody wants to pay rent all his/her life. People want their own houses, and whatever are the circumstances, Condos will still be the most affordable option for them in the contemporary market. In fact, converters are highly excited with the heavy return they have earned from the condominium conversion, and it looks like they are in mood to quit. Moreover, in most cities, now it is almost impossible to find ‘any?location for new development, let alone a ‘prime?location. Therefore, the future of condominium conversion looks bright.

Hence, here we see that condominium conversions are a very effective way of earning money in real estate industry. In fact, Condos offer various attractive options not only to the investors or the converters, but also to the buyers. Rising interest rates are unlikely to affect the popularity of Condos.