Posted on Sun, Feb. 19, 2006
Apartment renters in tough spot
Tenants in dilemma as apartments go condo
Herald Staff Writer
MANATEE - In the past few months, the nationwide condo-conversion trend has reached a crescendo in Manatee County. Almost every week it seems another rental property in the county announces it is going condo.
While those interested in owning their own home now have more affordable opportunities in the form of conversions, others are put in a predicament and don't know where to go.
According to Triad Research & Consulting President Michael Slater, a Tampa-based company that tracks losses in rental inventory, Manatee lost approximately 2,000 of its 9,000 rental units in 2005. Sarasota County has lost upward of 40 percent of its rental inventory in the past 24 months, he said.
These changes have affected not only potential renters but those who often helped them find properties to fit their needs, like Apartment Hunters.
Employees of Apartment Hunters, a company that specializes in providing free assistance to those looking for rental properties, have found it increasingly difficult to match prospective tenants with available properties that suit their needs in all areas of the Tampa Bay market.
"People come in saying, 'Please find a place that won't be converting. We don't want to move anymore,' " said Mark Berry, manager at Apartment Hunters.
Berry said they are losing inventory to conversions and the losses have changed the dynamic of Apartment Hunters' business.
"We are working with the individual investor when, in the past, we never did. We worked with large communities," Berry said.
According to the Manatee County Property Appraisers Office, there are 132 rental communities in Manatee County with more than 10 units.
When large communities like the 352-unit Hampton Bay apartment complex and the 252-unit Mainstreet are converted to condominiums, the area's available rental inventory is quickly depleted, leaving some wondering where to go next.
"I predict we'll see 3,000 new condo units this year and at least 1,200 of those will be conversions," said Dale Friedley of the Manatee County Property Appraisers Office.
Waiting to hear
'Scared to death and livid'
As signs went up proclaiming the new name and new intentions for the development formerly known as Hampton Bay, the Lewandoski family waited for the other shoe to drop. Living paycheck to paycheck wasn't always a way of life for the family of four - five if Lucinda, the black labrador who thinks she's human, is included.
Their 4,000-plus-square-foot home outside Chicago seems a lifetime away, though it has been less than a year since they lived there. Gone are the days of making $150,000 annually and feeling secure.
When Trish and John Lewandoski both lost their jobs at Alpha Bakery in Chicago within five minutes of one another, they knew change was on the horizon. But they never could have foreseen what a life in Bradenton would mean or how the booming real estate market would leave them feeling scared and displaced.
"I am between scared to death and livid," said Trish Lewandoski.
When The Herald ran a story detailing the Bradenton apartment complex's plans to go condo, most residents had already received notice of pending conversion, but not the Lewandoski family.
Trish Lewandoski said she asked whether the complex was being converted to condos and was told by the staff that they didn't know. She even asked a week before the letters went out.
Ashley Lewandoski is much older than her 17 years. The polite and poised teenager deals with pain adults more than twice her age can't fathom. She battles six auto-immune diseases, including two forms of lupus.
While the Lewandoskis are dealing with their layoffs and struggles to find new employment, Ashley has become homebound, requiring visits from nurses monthly as well as around-the-clock care.
"This is a full-time job. It's not a paying job but it's my child," Trish Lewandoski said.
John Lewandoski works hard for a local bakery company but between insurance changes and trying to catch up from the period of unemployment, paying bills is often a challenge.
"That one paycheck barely makes ends meet. Well, it doesn't make ends meet, actually," Trish Lewandoski said.
Medical expenses combined with Bradenton's high rent rates and the cost of day-to-day life makes the idea of saving money not much more than just that: an idea.
A month after MK Equity Corp., the Chicago-based company purchasing the complex, sent letters to some of their neighbors, the Lewandoskis finally received a letter stating their apartment is one of the 64 that is not for sale at this time. "Semantically speaking, the letter states 'at this time.' It doesn't give us any piece of mind," Trish Lewandoski said.
Stress exacerbates lupus flare-ups as well as Ashley's Reflex Sympathetic Dystrophy. The disease is attacking the muscles in her legs, which is both painful and frightening.
The family is just one of many who feel displaced and disillusioned by the trend of apartments turning into condos. Renters live in fear of losing the place they have come to call home.
An ailing mother brought Bill Johnson to Manatee County about 10 years ago. Now he calls the area home but finds himself facing a predicament that is becoming extremely common. Johnson's Harbour Pointe apartment is going condo.
"I expect to be finding another rental in the area," Johnson said.
He knows his battle won't be easy when his lease expires this summer. "Just driving around on a day-to-day basis, you see more and more apartments going condo," he said.
Johnson isn't interested in renting an apartment-turned-condo from an investor. "Let's face it, contracts don't mean what they used to years ago," Johnson said.
He also expects rent will go through the roof as rentals become more and more scarce. "Like anything else, it's supply and demand," Johnson said.
Johnson doesn't want to leave the area where his two stepdaughters live but doesn't think it's the right time to buy. "I believe that sooner or later the bottom is going to drop out," he said.
Johnson said he can't justify paying the outlandish amount of money for a property as the market is slowing. He also is astonished at some of the properties making the conversion to condos.
"Specific properties that aren't that attractive are selling at high prices," he said. "The market is so crazy right now that my gut feeling is somewhere in the next few years this market is going to change completely and it will probably spiral downward."
Tenant to owner?
Both Palm Cove, formerly Hampton Bay, and Sands Bay, formerly Harbour Pointe, are in the process of renovations, and sales offices are open. Wagner Realty is handling the sales of units in both complexes. Sales Manager Bill Davidson is excited about the changes on the horizon but hopes enhanced offers for current tenants may help those who want to become homeowners.
"Everything has its pluses and minuses, and condo conversion is no different," he said.
In his experience in the condo conversion market, Davidson has found that tenants only make up about 5 percent of buyers.
"There's a reason people are renting. Either they don't have the down payment or they don't have the credit established," said Michelle Daniels, mortgage broker with Intercoastal Lending Group.
When Mainstreet announced its intentions to go condo, the sales team marketed the change as an opportunity for current residents to become homeowners. Letters stating that mortgage payments would be comparable to what they were paying in rent and in some cases less were circulated.
The examples used in the letters were based on interest-only adjustable rate mortgages. In the development, the 678-square-foot, one-bedroom units are listed at $181,900. The units had been renting for $767 a month. For those Mainstreet residents who are able to put 11 percent down and who prefer the security of a fixed rate, purchasing a unit would cost them about $1,300 a month, Daniels said. Daniels ran the numbers at 6 percent interest with zero points.
Palm Cove is selling its 660-square-feet, one-bedroom units for $123,900. Rent for those units starts at $660. Using the same 11 percent down, with a fixed rate of 6 percent and zero points, prospective buyers can expect to pay about $920 a month, including condominium fees. Three-bedroom, two-bath units in Palm Cove start at $229,900.
The letter Mainstreet residents received detailed how much it would cost to purchase their units based on interest-only adjustable rate mortgages, something Daniels doesn't recommend in the current market.
"A year ago if you said, 'should I do an interest-only ARM?' I would've said yes because property values were escalating so quickly," Daniels said.
Lack of supply and high demand for rental properties lead to rent increases, said Berry.
Investors have already shown interest in many of the properties, and many of them will then turn the units back into rentals using property management companies. In many cases, Davidson said, the units will receive face-lifts before they re-enter the rental inventory.
Will market sustain this?
Just how long the condo conversion phase will continue is uncertain. When the conversion trend first took off, it was when there was a shortage of properties on the market and an influx of buyers willing to pay prices considerably higher than the appraised value of the home or condo. With interest rates climbing, more available inventory on the market and the acceleration of home prices showing little sign of slowing down, conversions seem to be gaining momentum, not losing it. Some think more competitive and realistic house prices may turn the tide.
"Now you can find a concrete block house for $229,900 without paying a condo association fee," Daniels said.
While that is good news for those in the position to buy, tenants like the Lewandoskis and Johnson are left wondering if they will encounter the same situation in the next rental complex where they settle.
"How do we know it won't happen again?" Trish Lewandoski asked.
Click Here For Original Article Online
Thursday, February 23, 2006
Posted on Sun, Feb. 19, 2006