Myself and 7 others purchased local condo conversions in Sarasota and made a very nice return. But first there are some things you need to know before you consider purchasing this product. Condo conversions are all the rage these days for a quicker profit but there are positives and negatives to consider.

Negatives: If there is a renter currently occupying the unit when you purchase they may do some minor damage to the place before they move out and with most conversion agreements they may have 30-60 days to vacate and end their current lease so you are not assured they will stay for the duration of your ownership. Some developers will have a mandatory vacation to repaint, carpet and redo the units for sale. Some developers may give the original renters first right of purchase usually at a discount price. Whatever units are left are then available to the general public. Most renters will not purchase because they don't have the down payment necessary to purchase and the money for taxes, insurance, closing costs, etc. Some developers sell "as is" with most every unit needing new carpet and paint to get it to sellable condition but most developers will offer closing cost credits to address those needs if you use their approved lender. In lieu of the credit, some sellers will offer a 1 year appliance warranty package instead.

If you purchase a condo conversion you must be prepared to ride the roller coaster market. In my own experiences you can bet they all follow the same formula. At first you will see a bunch of rental ads in the newspaper classifieds as units begin to close, and many try to cover their outgoing payments. Next thing you know people start getting a bit desperate and start dropping the rental prices figuring some income is better than no income and trying to undercut the glut of competition. If you can settle for less rental income or play the waiting game until the bottom feeders clear out then you will be in good shape.

You then have the "Flippers" who are in it just to make a fast $10,000- $20,000, but they hurt the market keeping prices down and after closing costs and commissions they don't make much anyway. Once they clear out the prices will then go up but there will be cycles where a ton of them will be up for sale and the prices will gradually drop again. If you can ride through these up and down times and hold them for a year you can make a great return on little down plus save 10% on your capital gain.

The last negative is this: Remember, most of these were built as apartments with particle board or plywood on the outside and only studs and drywall between them plus no elevator taking you to the 2nd or 3rd floor. Not the kind of place I would wish to live in but in markets with very expensive condos it is a great alternative.

Now for the positives. Here is what myself and the other investors did in the same project. When I bought in I reassured the other investors this would be a good short term project because the apartments unlike every other one was solid poured concrete on the first 2 of 3 floors so it would be much quieter and a good reselling point. The market was also very good and the location was convenient to everything. I purchased 2 units overlooking the lake which were also the largest floor plan and on the first floor which in a Florida market makes a big difference. The others took that plan and when that sold out, the 2 story town homes. I owned them both for 6 months, put 5% down on both through special financing or aprox. $11,000 on each, with selling prices of $211,900 and $221,000. I sold one for $302,000 and the other for $295,000, again for 6 months. It cost me $3,800 a month to carry both but that's a nice tax deduction at the end of the year. I walked away from the closing table with just over $180,000 including my original down payments. Another investor cashed out after 3 months due to a financial situation where he needed the money to put down on a property he had been waiting for. He walked with $48,000 and another investor from the same home town grossed just under $90,000 for one unit in just 5 months. I normally don't work with "Flippers" nor do I usually flip but under these circumstances with no renters in the units and a fast market it was great timing and after 5-6 months the market had risen quickly . He took his profit and put 2 deposits on 2 other properties, one of which is up $100,000 in 3 months after he closed on it.

Condo conversions are still doing well as a short term investment but not as reliable or profitable as pre-construction but in the absence of an pre-construction, a 100-500% average return from conversions can still be a nice way to go.