Condo fever

Margins decline as new developers compete for conversion properties

Fueled by low interest rates and a frothy market, $13.3 billion worth of apartment buildings that have been converted to condominiums were sold in 2004. This is record number of conversion sales up from $3 billion in 2003. According to market research firm Real Capital Analytics, 103,000 apartments have been converted to condos since January 2004.

One of the real challenges facing investors in this space is that the competition for properties is driving the cost of these assets in some cases far above the rental value of the building. In doing so, they are leaving little room for profit in the deal.

Several friends of mine have invested in conversion condos in the Miami area. Early returns on these investments appear real positive, I am most interested in how these assets fare over time as more properties flood the market.

Landlords Cashing Out as Condo Fever Spreads [NY Times] registration required