Condo vs. Multi-Family

6 Replies

Hello! We recently went into contract to purchase a 2-unit multi-family property in Savannah, GA.  It's set up as 2 condos plus a condo association instead of a multi-family residence.  Does anyone have experience in dealing with this?  My questions are:

1) What are the pros and cons to having it as a condo vs a multi-family?  So far I think the considerations are as follows, but would be curious as to others' experiences:

- Pro: you have the flexibility to sell one unit later without selling the whole property

- Con: Insurance seems to be more complicated (we would need to buy a condo association policy in addition to a policy for each of the condos)   

- Con: If we were looking to sell the property, a buyer would have a tough time getting financing

2) Has anyone converted a condo into a multi-family?  What was the cost/difficulty?

@Meghan Danaher For what it’s worth, most people would love to go the other way. People go to maddening lengths in high cost areas to turn apartments into condos. It’s also why I never like the idea when people talk about “buying all the condos in development ___ to create (what amounts to) an apartment complex.” I’m sure there have to be some narrow use cases where it makes sense to do your proposal but it’s a small sliver. Personally, I wouldn’t do it 🤷🏻‍♂️

@Meghan Danaher I agree with @Andrew Johnson comment. At the 2 unit level, you should like the flexibility aspect. Having 2 condos will allow you the ability to selectively sell each unit and retain the most amount of independence. 

Investors in high population areas do like to convert condos for this exact same reason. Although depending on the demographics on your area (and size of your personal balance sheet), you could go in the opposite direction. 

@Andrew Johnson and @Omar Khan Thank you so much for the insight!!! This really helps.

This may be a really stupid question, but given that this is a fairly high cost area and you've noted that people go to great lengths to turn apartments into condos...  I'm wondering if it's likely that one would be able to sell the condos separately for more than one would be able to sell the combined package for if it was a multi-family.   

Originally posted by @Meghan Danaher :

@Andrew Johnson and @Omar Khan Thank you so much for the insight!!! This really helps.

This may be a really stupid question, but given that this is a fairly high cost area and you've noted that people go to great lengths to turn apartments into condos...  I'm wondering if it's likely that one would be able to sell the condos separately for more than one would be able to sell the combined package for if it was a multi-family.   

 That is one way. The other reason is that operational flexibility. One can sell in pieces strategically.

@Meghan Danaher In my limited experience, when you have condos in a fast appreciating market, their values rise faster than rents.  So, yes, you can sell 10 condos more than a 10 unit apartment building.  All other variables being equal...which they never are :)