Repurposing old buildings into apartments may not be an exciting new concept, with its roots dating back to the ‘50s. But what should capture your attention is that this trend has continued to grow. In a recent report presented by RentCafé, almost 800 conversions were completed over the last decade in the United States. That is about 300 more conversion projects in the 2010s than was seen in the early 2000s. So why is this trend taking the real estate market by storm?
Apartment conversions allow cities to be flexible to meet the needs of their communities. According to RentCafé, 65% of conversions are aimed toward supporting middle to low-income renters. Conversions allow densely populated metropolitans to incorporate more affordable living space without having to completely overhaul the established infrastructure. Cities can repurpose all different types of buildings, such as old hotels, factories, schools, healthcare, office buildings, and other buildings unique to their community. This flexibility enables metropolitans to revitalize struggling neighborhoods or industrial and business corridors, while still being able to preserve and restore buildings of historical significance.
Apartment conversions are also a win-win for real estate developers seeing as they are more cost-effective and much easier for developers to physically execute. According to Pat Vassar, Ignite Funding’s Director of Underwriting, “The bones of the buildings they are repurposing are similar enough to apartments that it makes for an easy transformation.” Conversions enable developers to acquire properties in highly desirable locations (i.e., hotels and office buildings are often in downtown, central metropolitan locations). Since these buildings tend to be the less desirable despite their favorable location, developers can still purchase them at an incredibly discounted price.
Due to the fact that multi-family properties are typically more desirable an asset than the original building format, apartment conversions can significantly increase the overall value of the property. Being able to effectively add value to an existing structure is essential for a developer to have a successful exit strategy for a project, whether developer’s intent is to retain the property for its cashflow or to sell to a prospective buyer that will add this cash-flowing property to their portfolio. The feasibility of a developer’s exit strategy is an important aspect that Mr. Vassar analyzes when vetting a project to offer as a Trust Deed investment. “The viability of a developers exit strategy can significantly mitigate the risk to Ignite Funding’s investors, which is always one of our top priorities,” says Mr. Vassar.
Ignite Funding constantly monitors real estate trends to secure opportunities for their investors to optimize their real estate portfolios through diversification. Ignite Funding enables investors to diversify across states/regions, borrowers, development phases (i.e., acquisition, horizontal development, vertical construction, or rehabilitation) and asset type.
If this type of investment intrigues you, you can subscribe to our text message list and get notified each time a new project is released. Text the word “Investments” to 844-552-7022 to opt-in. Need more information? You can schedule a free 15 minute consultation with one of our licensed investment agents by clicking here.
Ignite Funding, LLC | 2140 E Pebble Road, Suite 160, Las Vegas, NV 89123 | P 702.739.9053 | T 877.739.9094 | F 702.922.6700 | NVMBL #311 | AZ CMB-0932150 | Money invested through a mortgage broker is not guaranteed to earn any interest and is not insured. Prior to investing, investors must be provided applicable disclosure documents.
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