Reverse condo conversion has begun to pick up steam in Chicago, as strong rents, reduced transaction costs and higher proceeds have been luring condo boards to consider the bulk sale of the property. There are a number of factors driving this temporary investment strategy. For individual condo owners who have not been able to sell their units due to unattractive retail pricing or FHA lending constraints, this process gives them an opportunity to “get out” of a building where they may have high interest or have moved on and inadvertently become a landlord. Savvy investors are recognizing that with limited multifamily supply, increased cost of both land and construction, and a low interest rate environment acquiring certain condo buildings can be a win-win for both parties. Whether value add is included or not, the ability to take advantage of the steady rental market is bringing both seasoned and first-time investors to the market with this option in mind.
In Chicago’s coveted Southport Corridor, property values have continued to increase for both sales and rents. Recently 3846-3856 North Southport, a brick multifamily condo building home to eighteen, 2 bedroom/1 bathroom units, was sold to an investor with the intent to de-convert the property to high quality rentals. “The ease of the transaction coupled with the desirable unit mix for renters allowed for us to field multiple offers,” comments Chris Weber, previous owner at the property and Broker at 33. “With seasoned investment real estate representation throughout a sale of this magnitude, owners can truly come out ahead.”
Here are three key steps Chicago condo owners should consider prior to entering into a discussion regarding reverse condo conversion:
– Get representation. A Broker is needed for a transaction of this magnitude, it will more than pay for itself through legal issues, legal liability, negotiations and most importantly, buyer access which continues to grow in size.
– Get an opinion of value before you begin the process and have transparent conversations with the board and other owners in the property.
– Ensure your building is healthy – strong reserves, up to date on exterior maintenance, common areas well-kept and water issues mitigated.
Chicago Tribune recently posted this article: Deconverting condos feeds renters’ growing demand