Realty Times November 26, 2003

What A Rental Converter Expects From A Real Estate Agent
by David Fletcher

What are some things a real estate agent can do to help a prospective rental converter determine the feasibility of buying a property for conversion?

You are not an engineer, an advertising agency, banker, or some of the other parts of the puzzle, but you are a sales professional with in-depth market knowledge of your area. As a Realtor, you are qualified to help the converter determine if an apartment conversion to condominiums makes sense.

But, you cannot do it by yourself. Expertise in several areas must be used.

The rental conversion business is a team effort. One of the greatest services you can provide the converter before the apartment building is purchased is to bring in the strongest experienced rental conversion team possible. This could be an invaluable service, especially if the converter is not from your area.

Who would some of the team be?

Team members would include:

  • A good condominium-oriented attorney. The attorney will draw the condominium documents and assure that all legal matters are properly executed before, during, and after the conversion.

  • An advertising agency or marketing firm. The marketing firm will provide the research and marketing positioning and plan to draw prospects to the condominium. The firm may or may not be able to help you price units. As the expert, you should have a lot to say about prices. Usually the MAI appraisal will be too conservative, the converter's too high.

  • The property manager of the rental property may or may not be an asset. The key is the property manager's loyalty when he is told that the property is being converted to a condominium, meaning he may be out of a job soon. You and the converter need to review this in detail to weigh the risk of telling the property manager and what the contingency plans are depending on his reaction to the news his apartment building is being converted to condominiums. The problem is complicated further if he lives on premises.

  • The banker will obviously apprise you of what his bank needs to help provide needed to obtain interim financing (renovation and advertising funds) and end loans (mortgage) financing. Both funding sources may come from one source, but not necessarily.

  • The model merchandiser. This person specializes in furnishing models for new homes builders, and that's all they do. They may or may not be interior decorators.

    When all costs are in, you will be asked to add your monthly sales projections in terms of units and dollars. Three are recommended.

    The most conservative sales projection you give to the bank. The most aggressive projection goes to the sales manager. The one the converter lives by is the one that lands between these two.

    If the projections make sense to the converter, it is time to negotiate a contract for purchase.

    Taking on a large rental conversion is serious business played on a very fast track. Make sure you can run this race before you agree to run.


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