Hi,
My question is in regards to building or converting rental apartment units to condominiums and then eventually selling them off.
In the US, I have converted a few apartment units that I have bought in Florida into condominiums. I have massively increase the value of the property by nearly 40% through condo conversion. The rule in the US states that I had to give my existing tenants 90 days notice about my plans and also given them about $500 relocation assistance if they decide not to buy the condo. Is that possible here in Australia? what are the rules when it comes to converting apartments in to condos?
Thanks.
Kindest regards,
AllanThere are different types of condominiums. For example:Townhouse type condos, apartment house condos, office building condos, industrial park condos.
It is basically any of the above where the owner holds title to each individual unit.Each owner pays taxes on his/her property,there is an underlying fee/management fee and is allowed to sell or lease it out.
To keep it simple, there is no difference between a rental income building and a condo apartment unit in terms of appearance. The only difference is the actual purpose of the land or building. If you convert your apartment unit to a condo your purpose is to sell out all of your ownership of the property. The advantage of this I found is in financing the actual project. A condo apartment will usually have a list price of at least twice the cost. Lenders in the US if you are building a condo will lend you money based on the projected value and since condos are more worth you’ll be able to easily get 100% financing easier than on rental building or better yet mortgage out to be use for another project.
Let’s say you own a building with 100 units and each unit cost $100,000. The building developemnt cost is about $5,000,000. With a 70% LVR you can borrow 70% of $10,000,000 ( projected value of the condo) which is equals to $7,000,000. Since you get higher use of the land because the structure is worth more you are able to mortgage out $2,000,0000 but with rental income building you still have to come up with the remaining 30% of $5,000,000 while you are able to mortgage or net out on the condo deal. This is just an example ok. In any states in the US, you have to notify your tenant thatyou are converting their apartment to condo and have to give them an option to buy it from you.
Sounds like converting company title to strata. Or strata titling an apartment complex oin one title.
Can be done. There may be structural requirements depending on the age of the building – things like fireproofinf between apartments etc.
All the best,
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Thanks Simon for your reply. I am still learning the rules when it comes to investing here in Australia. i am trying to adapt some of the strategies that I have used in the US here.
Really appreciate your help.
Kindest regards,
AllanSimon – my understanding is that in Oz the lenders will only lend on hard costs not end value, so the above example wouldn’t work so well. is that right? eventually you run out of ability to fund these things as you have to stump up 20% of the project, unless they are all presold or until the building is complete. If you could borrow against projected end value you could go crazy
Extensive list of ‘Off The Plan’ property available for sale in Perth.John – 0419 198 856
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