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Your First Condo Conversion Project: Finding the Right Deal
by Emily Cressey
As a commercial real estate investor, you may have purchased apartment buildings in the past. Maybe you’ve tried a renovation project or two, but… have you taken it one step farther and completed your first condo conversion project?
If not, perhaps your time has come. Read this account of a commercial real estate investor in Tucson, Arizona buying a well-located, but run-down 12-unit apartment building, did just that. It turned out to be the perfect first-timer’s condo conversion opportunity.
It all starts with finding the right deal, and Shannan Marty – a commercial real estate investor out of Tucson – readily admits that when she first found this deal, she knew the units needed a lot of work, and she knew that the building wouldn’t make sense to buy as an apartment building if she wanted to simply rent it out for
cash flow. The rents were not high enough to support the high cost of the building because property values had been rising steadily in that area for the past several years.
The opportunity was ripe for a keen real estate investor to come onto the scene and increase the value of the property by fixing up the units and changing their use. That’s exactly what Shannan Marty decided to do!
In a recent interview, Shannan Marty shared her secrets (and tough lessons learned) for making a condo conversion a success.
As we all know, commercial real estate investors make their money by buying the property correctly. Here’s what Shannan had to say about finding and purchasing just the right deal for this condo conversion project:
Finding Her First Condo Conversion Project in a Hot Market
Shannan told us that most of the projects she gets involved with are not on the MLS, if they are listed through a real estate agent on the Multiple Listing Service, that indicates to her that she’s probably too far behind the buying curve.
In the case of this condo conversion deal, the project was not listed on the MLS, but one of the realtors that she works with let her know that there was a project available for sale adjacent to the University of Arizona.
The realtor told Shannan, “It’s kind of a quaint little place. I think you might want to take a look at it. I think you’ve got the right touch for it.”
Shannan went over and strolled around and looked at it. It was an older motor-court style 12-unit apartment community built in 1927. The units had always been used as rentals and for 10 years of its life the facility was actually used by a fraternity (which we can guess probably accounted for about 30 years of wear!). Very little had been done to the property in its 80-year history; the plumbing was sub-standard and it needed electrical upgrades, paint, asbestos removal and more! Everything you’d expect in an 80-year old building plus a few surprises…
However, the apartments were very charming and they had a KEY location – one block from the University of Arizona. Shannan felt that these factors (especially the location) helped make it as close to a recession- proof location as you were going to find in Tucson.
She began to negotiate with the real estate investor who owned the land and after about a month of back-and-forth, they were finally able to put it under contract!
To understand even more about how Shannan was able to lock up these apartment buildings and then convert them to condo’s, listen to the full interview:
Condo Conversion A-Z: What I learned from my first Condo Conversion.
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