Converting Apartments to Condos

[Cheyenne Jones]

Does anyone have experience converting apartment buildings to individual condos?  For example, if you bought  a 20 unit apartment building  for $300M and converted it to condos selling for $400k each (this is California) sounds good, but what pitfalls should we look for? 

[Ellis San Jose]

I have done this.

If you have existing financing for the apartment building you will have to get a new loan ( typically more expensive loan for the conversion). 

Typical terms are that as each condo is sold after conversion, the bank gets paid first (paying down the outstanding balance) & the investor doesn't get the profit until the last few units are sold. 

Also, you would be smart to presell units because FHA financing isn't available if there aren't enough owner occupied units as a percentage of total occupancy.

If you are planning to empty out the building during conversion you will cut off your rental income until the conversion is completed.

There are many more, but that's it for now it's late.