Thoughts on buying condo conversions - buy vs. rent?

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Submitted by ctr70 on October 29, 2009 - 8:29am

As a single person renting, condo conversions are the only affordable product in decent neighborhoods in San Diego. Want to get others thoughts on buying one.

*Pro's*
1. Location: you can get them in much better neighborhoods than sfr's or non conversion condo's
2. over time they will be the only affordable housing product in San Diego, as SFR's get out of reach again (already starting to happen)
3. for me, the PITI + tax benefit with buying would be equal or lower than rent (HUGE BONUS is the $8k tax credit now until April 30th 2010)
4. Lock in a super low 30 yr fixed rate right now

*Con's*
1. they are bascially 1960's-1970's apartment buildings on the inside with cosmetic on the outside
2. most have major HOA issues
3. may be tough for new buyers to get financing on for years
4. large special assesments down the road

.....I think even with the "con's", if the PITI is equal to rent (+ the bonus of the $8k tax credit) it may be a good move. Over the next few years San Diego will become terribly unaffordable again (it alread is again), and I think there will be demand for conversions just because of the locations and price points.

Is there anyone out there that has owned one for a lot of years that can offer feedback on owning them over time?

‹ Fight the $8k tax credit Do we need a Modified Case Shiller Index? ›
Here is some useful
Submitted by Zeitgeist on October 29, 2009 - 9:19am.

Here is some useful information on a previous thread (not necessarily about conversions, but some of the implications of owning when most are rented or vacant):
http://piggington.com/downtown_condos_ar...

Zeitgeist re: you link....FHA
Submitted by ctr70 on October 29, 2009 - 10:02am.

Zeitgeist re: you link....FHA has already delayed twice the implemenation of it's new condo rules. IMO I think FHA/Fannie is going to have to make some adjustments to their condo guides or they are going to have way too big of a problem with condo foreclosures. I would look towards FHA possible making some adjustments to make it slighly easier to buy condo's. b/c they already hold so many mortgages in condo's, it's not going to be in their interest to create draconian guidelines that reduce the value of those mortgages.

I also think if you plan to live in the condo and hold it for a while, this stuff will get worked out over time. As long as you are in a good neighborhood and getting in at close or near bottom (now), good chance you will be OK. They are going to be the ONLY semi-affordable housing left in San Diego and there will be limited housing suppy again in San Diego. This is not Texas where you can just build, build, build forever. SFR's in good neighborhoods are out-of-reach for most, or even those that could buy, but don't want the $3,500+/mo housing payment of a SFR in a *decent* San Diego neighborhood.

I've thought the same thing.
Submitted by werewolf34 on October 29, 2009 - 10:05am.

I've thought the same thing. But as a potential buyer, you need to do a LOT of physical due diligence on a condo conversion.

Many of the one I like on paper (verano, lucera) are in terrible condition (leaky pipes,etc)

I'm looking more in the
Submitted by ctr70 on October 29, 2009 - 11:42am.

I'm looking more in the better North Park areas and Univ Heights. I've noticed some normal buyers who bought conversions in later 2008 are already able to sell with enough equity to pay the Realtor commission AND walk away with some cash. So the prices have risen a fair amount in some cases in the better areas since late 2008. Even the 1 bedroom conversions in better areas where I'm looking get hammered with multiple offers as soon as they hit the MLS and a lot of cash buyers.

Could you hire an inspector that would be able to look under the hood of a condo project? I would imagine that is not as simple as a single family home inspection.

Rents in UTC are coming down
Submitted by bubble_contagion on October 29, 2009 - 12:05pm.

Rents in UTC are coming down hard. The place where I rent is offering -$100/mo for all renewals and -$250/mo move in-specials for 6-12 months. Yesterday at Whole Foods I found flyers offering -$150/mo on four nearby complexes owned by the same company. During the weekend I visited some of the high-end rentals and most are offering -$400-$600/mo concessions on quite a few units. 2br – 2bth at the conversions are renting for about $1600 which is less than before conversion. Also keep in mind that each of the conversions currently has at least a dozen units in pre or in foreclosure.

You can get anything for a
Submitted by werewolf34 on October 29, 2009 - 2:02pm.

You can get anything for a price I suppose. You would need to inspect the particular unit and have a general assessment of expensive condo-wide repairs (roofing, slabs, etc)

Personally I would also want to see the minutes and ledgers of the HOA to make sure they are not kicking the can down the road on repairs.

I wonder if their are any
Submitted by ctr70 on October 29, 2009 - 6:08pm.

I wonder if their are any consultants or home inspectors that specialize in condo's that could both help you inspect the physical structure and the financial soundness of the HOA?

They have a lot of plumbing
Submitted by Ricechex on October 29, 2009 - 8:45pm.

They have a lot of plumbing issues. Most of them share a community laundry. Why buy a place and have to run down to get your clothes out of the dryer?

I would get a home warranty
Submitted by Aecetia on October 30, 2009 - 12:50am.

I would get a home warranty with the purchase and check the Internet for complaints about the company that provides the warranty. There are a lot of companies and a lot of complaints about many of them. I think what everyone is trying to say is do your due diligence and look into the way the association is being run, find out if there are any suits against them, etc. I am sure there are great buys out there and it is still a buyer's market.