Strategy for buying an entire condo complex?

Question

Has anyone attempted to purchase all the units in a condo complex before?  Once I identify a good condo for investment I try to buy multiple in the same complex.  There is one complex in particular that I believe units are undervalued and I was thinking of reaching out to all owners and trying to buy them all as long term rentals.  Does anyone have any experience in doing this?  If so, do you have any strategies you can recommend?  Below are some ideas I had:

• Run for President of the HOA
• Try to increase HOA dues and reserves
• HOA aggressively foreclose on past due HOA dues and buy them at auction
• Try to prevent any MLS sales by making owners aware of my intentions and reaching out to them directly
• Try to disqualify complex for conventional/FHA financing due to owner/investor ratio rules
• After disqualified reach out to all owners at the same time and offer to purchase
• Continue to purchase units off MLS if any become available

Any thoughts or recommendations?

Dan Stehr · Answer

The target condo complex is close to 100% owned by investors currently and investors have trouble with loans.  The thought process is to buy as many as possible at close to market rate with cash.  Any remaining holdouts I would assume you would need to pay double or triple market rates.  I believe the magic number is 75% ownership before you can essentially force a deconversion and convert the complex into an apartment complex.  All this is legal and done all the time.  Just looking for someone with experience.  Any other owners who refuse to sell would get a big payout at the conversion.

Michael K Gallagher · Answer

@Dan Stehr really interesting concept. Keep us updated on how it goes I’m curious now!

Dan Stehr · Answer

Good point.  Probably best to stay off the board in these situations to avoid any potential conflicts.  With majority ownership voting rights you would have a lot of sway on HOA dues, rule/declaration changes, and which board members get elected. Hard part is trying to get anyone else to run for the board.

Actual apartment complexes with the same cap rate sell for much more than the current combined condo values, which is the purpose behind deconversions.  Overall it would be much better for all existing owners to agree on converting and sell as an apartment, but very hard to get that many people to agree on anything.

Taylor L. · Answer

Ethics aside, depending on your state, foreclosing based on past dues can be very difficult.

You can also expect enormous resistance when you try to maliciously raise fees.

On the ethics side, Here is an article on board members' fiduciary responsibility and the requirement to act without conflicts of interest. I own an investment condo and am on the board of the association. If I got wind that someone in the complex was attempting a hostile takeover of the complex you'd better believe I would be speaking with other owners and attorneys about our options. I am not an attorney, but I believe any court would find that the president was not acting in the association's best interest and was indeed willfully self-dealing when he was found tendering offers to owners who were about to be foreclosed on.

Why do this when there are actual apartment complexes out there to be purchased?

Caroline Gerardo · Answer

"try to disqualify complex for conventional/FHA"  Wow just wow.. .                   But in reality conventional loans can be closed on a complex without the 51% owner occupancy.    How about adding to your list:  Offer everyone triple the market value and end up with a three very angry owners remaining who think up all kinds of schemes and lawsuits.