Condo Development
Does anyone have thoughts/experience on condo development in the current environment? I'm seeing lots of activity since it appear to be the only development type that makes financial sense in many of the major metros.
Lots of liability. Where are you seeing condo activity pick up?
Any color on what the liability is with condos specifically?
Condos are an inherently high-liability project type. Assume that your buyers will sue you for construction defects at the end of every project and that you'll have to fight with them before eventually settling. There's a cottage industry of consultants who go around doing construction defect reports for condo associations that the associations can use to go after the developers with.
Florida mainly
I've seen a few smaller projects continue (sub-30 units) but that's about it. My area has a strong rental market and condos have never really been a big part of the mix, so I think there is simply less to comp to when putting a project together. I have a site in a suburb downtown that would be a great spot for condos but there just aren't enough good data points to see if the sales expectations can justify it. Luckily there is a project that's about to start sales around the corner so I'm hoping they kill it and it opens the market a bit.
Bump - anyone got any insight? Keep reading a bunch about the liability issues with condos but I see them getting built so clearly there’s a strategy that works. Anything on what gets these deals to pencil?
What gets the deals to pencil are basic economics. The liability stuff is manageable if you just set aside a larger potion of your budget for legal fees. I've heard sometimes condo developers will intentionally hold back a unit or two so they can join the HOA to make sure nothing crazy happens.
I know of a high rise development (ultra-high end) where the windows got VE’ed for SHGC and the HVAC engineer didnt know about the change, so all kinds of owner complaints due to cooling issues.
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