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CBS 47 NEWS
Local Condo Conversion Trend Affecting Renters
Have you been forced to move out of your apartment complex because it's going condo? If so, you're not alone.
Condo conversions are developing everywhere you look. And while it may be making it tough for renters to find a place to live, buyers are enjoying the investment opportunity.
Jacksonville's new apartment guide is pretty thick, suggesting there are lots of places to rent. However, a closer look reveals that some of these places technically no longer exist.
Some places in the guide like the Fairways have new names. What was formally the Fairways, is now the Summer House, and places like this are no longer looking for renters. They want buyers.
Toni Foxx has enjoyed apartment life at the beach for three years, but now her complex is being converted into condominiums. This news had Toni frantically looking for a new place to live.
"I don't have money saved up," she says. "I've got to get movers. When is this going to happen?"
The same thing happened to Anne Bourdeaux. She rents at the Reserve at James Island and didn't think she wanted the commitment of a mortgage. "I'm very low maintenance," says Anne. "I like to just cut a check and be done with it."
Anne soon discovered that apartment complexes were getting harder to find in the condo rush.
Fitch, a New York financial analysis firm, says the number of apartments bought for conversion across the country jumped 350 percent in the past year. Here in northeast Florida, there are at least 30 condo conversions, says Realtor Will Vasana with Watson Realty. In fact, you can't go anywhere in town without seeing the signs.
Developers are buying these properties because they're cheap to renovate and because their target market of buyers are already living there as tenants.
The buyers' strategy worked. These condos have become so popular, they're often selling out before they're even advertised.
"People park a mile away, just waiting to get into the gates," says Peggy Gachet with Watson Realty.
However, these condos aren't cheap, and their getting more expensive every day. According to the Northeast Florida Association of realtors, the average sales price of a two bedroom converted condo in the Duval/St. John's County area in 2003 was $197,800 dollars. That number jumped to $295,900 in 2004 and reached $365,000 this year.
Gachet says these prices are low compared to many other cities across the country.
"If you compare our prices to nationwide prices, we're lower and you can get more for your money," she says. "It's hard to those of us who have been here awhile to say, but it's true."
This is why Toni Foxx decided she would invest in a condo conversion after all. She and her roommate recently bought a one bedroom at Summer House, paying $128,000 dollars for 550 square feet of total space. And, Foxx bought the property sight unseen.
"This is tiny. I'm thinking, I can't believe this costs what it costs," says Foxx. "I did it because of what happened here. In six months, people sold their stuff for twenty to twenty five thousand dollars more, so I thought, you can't lose."
But what are you really getting for your money? Not all condo conversions are created equal. Most developers say they'll make some renovations to the apartments, but that's it.
Developers of Ocean's Edge on 3rd Street in Jacksonville Beach are gutting the buildings and starting from scratch. Either way, how do you know if these condos are a solid investment? Could this real estate bubble burst leaving many new owners in the red?
Real estate analyst Tom Rau says he doesn't think so.
"I don't think we're going to look for the burst of the bubble," says Rau. ''I think we'll see a flattening of the curve, the flattening of the appreciation curve, perhaps of the interest rate curve, and it will diffuse itself slowly."
With an average of 1,100 people moving into the sunshine state every day, Rau says there will always be a demand for that housing.
Many of the prices of these condos have jumped significantly. Some new owners translate that into profit, when in reality, they won't make a profit until they actually sell it. And with so many new units on the market, the actual prices may ultimately be driven down.
As for renters, this condo conversion trend may make rent more affordable. Many people are buying these condos with the hope of renting them. And with so many on the market, experts believe the rates will become more competitive.