Condos and Loft Conversions

In many areas of the country where housing demand is greater than supply, apartments and even commercial buildings are converting to condos. Their main attractions are location and/or price. If it’s a trendy location near downtown or a university, you’ll pay a premium. Apartment buildings converted to condos offer ownership at attractive prices. But when buyers want to move up and find they can’t sell, they’ll rent their units. As more and more units are rented out, values can nosedive.
Typically, one-bedroom units are at the bottom of the food chain and the most difficult to sell. If at all possible, go for at least a two bedroom. Remember, in an economic downturn, conversions are likely to lose more value faster than other types of housing. When Joe retired, he and Sandy bought a warehouse conversion in a great downtown location wanting to be close to cultural events and the Delta Center, where the NBA Jazz played. It was an upscale project that didn’t quite live up to expectations. The local real estate market cooled, and two years later not all the units had been sold. The developer discounted the remaining units in an effort to close the project. That dropped the value on the sold units several percentage points. If owners wanted to sell, they would have to compete with the new discounted units, and that would mean taking a substantial loss.
So where did Joe and Sandy make mistakes? First, they bought into a new project when the housing market was strong, not taking into account that the area also had single-family homes in the same price range. In order for the loft development to hold its value, there would have to be a continuing hot market with little competition from condos and single-family homes.