Condo Conversion Targets First-Time Buyers, Those Priced out of Florida Home Loans
Jeff Sasada recently told his story to The Herald Tribune. He had wanted to purchase a house and take out a Florida home mortgage loan in the Sarasota-Brandenton area … but nothing was available for under $200,000.
Therefore, the 24-year-old Sarasota- Manatee Airport Authority employee purchased a converted condominium at The Sanctuary on 26th Street West in Bradenton instead. The price was just $139,900 for a two-bedroom spread. The best part of it was that by using several first-time home-buyer incentives, he pays only $1,053 per month.
That’s a $853 per month for a fixed, 30-year mortgage with $200 per month in maintenance fees.
“I was tired of renting,” said Sasada, who formerly leased a one-bedroom apartment in the same complex. “My whole objective was to buy something and build equity that I can use to buy something else three or four years down the road.”
Condo owner targets first-time Florida home loan owners
For Matt Kihnke, the owner of The Sanctuary, buyers like Sasada are exactly whom he wants to fill his 272-unit complex. During the past six months, as the Florida real estate market has slowed and investor interest in converted condos has evaporated, Kihnke’s focus has changed to accomodate these circumstances.
That means condo converters like Kihnke are now completely dependent on end users such as Sasada and are willing to offer hefty incentives to attract them. Kihnke says he can get buyers into one-bedroom units for as little as a $500 down payment and $750 per month for the first year.
Kihnke has been one of the biggest players in Southwest Florida’s condo conversion market over the past two years. The Chicago-based investor started by converting the 70-unit City Walk apartments in Sarasota. He then bought the Brookwood apartments on 26th Street West in Bradenton. With help from Central Park Realty agents, he sold the units in a matter of weeks.
The overwhelming majority of buyers at that time were investors, said Ross Bryans, president of Central Park Realty. Thinking the trend would continue, Kihnke spent more than $50 million to buy three more Bradenton apartment complexes: Saddle Creek, Harbour Point and Hampton Bay.
But by the time units at these three complexes had been refurbished and were ready to sell, investors had vanished. Kihnke reacted quickly; he slowed down his conversion efforts, along with other builders, as they reacting to the changing housing market.
He sold the 352-unit Hampton Bay complex to Odessa, Texas-based RDC Development for $33 million in early April and stopped trying to sell units at the 260-unit Harbour Point.
Offering incentives to home owners
With the fate of those two investments temporarily settled, Kihnke and the Central Park Realty team began focusing full-time on units at The Sanctuary. To do that, they are having to offer incentives among various selling strategies.
It’s not enough that units selling for $89,900 to $149,900 are the most affordable housing option on the market, Kihnke said.
“The people we’re catering to don’t have a lot of money and we need to get closing costs and monthly payments as low as possible.”
The first thing Bryans and his partner, John Petitti, do when potential buyers expresses interest in units at The Sanctuary is to get them qualified for Florida home loans by on-site mortgage brokers. If potential buyers turn out to have bad credit, Bryans and Petitti provide information about how their improve their credit score.
If the potential buyers have good credit, Bryans and Petitti put them in touch with Florida home loan brokers who can get them 100 percent financing and the lowest possible interest rates. On top of that, Kihnke is waiving the $200 per month condo maintenance fees for two years and offering to pay down buyer mortgage rates by 2 percent the first year and 1 percent the second year.
In addition to owner incentives, Bryans said first-time home buyers could also get government assistance in the form of FHA loans. Depending on income levels, they might get as much as $20,000 in Manatee County zero-interest-rate SHIP funds.
That money can then be used to reduce monthly interest payments by as much as $110 on a $100,000 Florida home loan, given current interest rates of 6.5 percent. Sasada used the money to reduce the principal on his mortgage from $139,900 to $129,900, which cut his mortgage bill by about $55 per month.
In addition, he got $4,500 in closing cost assistance. As rental costs rise, such an alternative could appeal to those who wish to take out their first Florida home loan.
