Apartments to condos switch can make sense

Over the past two decades, hundreds of apartment units in the Boulder area have been turned into condominiums, and the trend continues to play a crucial role in the local housing market.

Tom Fowler, president of Fowler Real Estate/Better Homes & Gardens, knows the process well. During the 80s and 90s, Fowler’s company handled several large-scale conversions in which sprawling apartment complexes were removed from the rental market and changed into Boulder’s version of affordable housing: condos.

The list of converted apartment complexes is lengthy. From the early 80s, Fowler remembers the Remington Post, at 30th Street and Iris Avenue, and nearby Stratford Park. Then came a mid-’80s condominium market lull, and the number of conversions leveled off.

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In the 90s, Fowler says, the market has ripened again.

The Trout Farm complex, on Folsom Street and Valmont Road, and the Stonewall apartments, at Baseline Road and 55th Street, joined the condo ranks. Country Club Greens in Gunbarrel and The Seasons at South Boulder Road and Foothills Parkway are other examples.

Part of the reason for the trend, Fowler says, is the city’s strict growth controls. In most communities, it is possible to build new condominium complexes.

“But within the City of Boulder,” he says, “there’s no such thing as a new condo.”

According to Fowler, the resulting apartment-to-condo trend has affected the homebuyer — and the renter. The increase in the number of condos has given new hope to those who can’t afford to pay the average $275,000 price tag for a house. A condominium can be purchased for about $140,000.

“It has become Boulder’s affordable housing, there’s no doubt about it,” Fowler says. “It’s the only affordable way to get into ownership in Boulder.”

On the other hand, removing apartments tightens the rental market and drives up Boulder’s already-high rents. “It takes rental units away, but it provides homes for buyers,” Fowler says. “So that’s kind of a mixed bag there. Now the question is, is this going to continue?”

The long-time Boulder Realtor says there are some constraints on the apartment-to-condo trend. Some apartment complexes are “dumps,” Fowler says, and are better suited for student housing than condominium conversion.

In addition, converting an entire apartment complex into condos is not a simple process. The owner faces the difficult task of putting renters on notice and telling apartment residents to move out. Then there are the financial hurdles: marketing, remodeling expenses and the holding costs incurred while the building is between occupants.

“It’s a very expensive proposition,” Fowler says. “A lot of people think it’s easy money, but it’s not. It’s a big turnover.”

Because of the headaches involved with converting a major apartment complex, many people perform the transition on a smaller scale.

Kyle McDaniel, a broker at Four Star Realty in Boulder, says a lot of individuals avoid the costly hassle of a huge project by purchasing a four- or six-unit apartment building, converting it to condos and selling them individually. The process is a loophole in the City of Boulder’s strict rules on subdividing and minimum lot size per unit, he says.

“Anything less than 12,000 square feet is out of the question,” McDaniel says of the city’s regulations on minimum lot sizes. But once the legal description of a unit is changed to that of a condominium, it can be sold individually.

Attorney Bill Love, of the Boulder-based Wells, Love & Scoby law firm, has changed the legal description of an apartment to a condo about five times in the last couple of years. To register a condo, Love says, a property owner needs to write articles and bylaws for the homeowners’ association, create a declaration outlining the owners’ rights and responsibilities, and provide a three-dimensional survey map of the property.

If the complex contains more than 10 units, Love adds, the owner needs to apply for a Colorado Real Estate Developer license from the Colorado Real Estate Commission. The conversion process isn’t as easy as it used to be, he says.

“We have 44 pages of condominium laws where we used to have five,” Love says.

For a while, the practice of buying four old apartments, remodeling them and selling them as individual condos was a very profitable business, McDaniel says, especially in desirable neighborhoods. But apartment owners have caught on, and now the asking price of an apartment complex reflects its future worth as a collection of separate condominiums.

“Three years ago,” McDaniel says, “that was easy money. Now it’s not easy money anymore.”

But he expects conversions to continue in Boulder, especially in high-demand areas like the nicer neighborhoods, low-traffic areas and downtown. Elsewhere in Boulder County, however, conversions have not been as prevalent, McDaniel says. The apartment-to-condo trend is a product of the housing market. In Boulder, he says, people will buy a $125,000 condo downtown before shelling out $300,000 for a house.

But the demand for condos is not the same in Lafayette, Louisville and Longmont, because very few will purchase a $125,000 condo when they can get a house for about the same price, he says.