Cran125GPS t1_j5b7ocn wrote
Reply to comment by WooNoto in Developer proposes 375 apartments at former site of Smokestack BBQ in Worcester’s Canal District by moisheah
Condos in a building like this unfortunately aren't going to happen. It's not financially feasible in a market like Worcester, for a number of reasons.
Trying to be helpful here, not argumentative, so here are a few reasons:
The return per square foot just isn't there. You can rent these units for a higher psf rate than you can sell them. I know everyone is complaining about housing costs here in Worcester, but the reality is that you can buy a single family home for less cost per square foot than it would take to build a similarly sized condo, by a large margin (about $200-$300psf to buy vs $500 psf to build where you'd need to sell for $700psf to make a return) so they aren't economically viable. No one is going to buy a 700k 1,000SF condo in Worcester.
Condos are significantly more expensive to build than apartments, which excacerbates the problem. The level of finishes on a condo tend to be higher, and the build quality has to be higher. When you are renting an appartment, it's pretty much take it or leave it to the person that wants to rent. In a condo building you want to pre sell, and then there are always issues when the units are built of people that bought the condo coming and and having crazy punch lists and huge battles trying to finish the project. It's just a huge headache that developers don't want to deal with.
Continuing on the last point, if you are a developer buidling these as appartments, it's a one owner sitsituation. You either hold it and make money of the rents, or you sell it to an institutional buyer that really only cares about the cash flow coming in. If these were condos, you now have 100 different buyers to deal with, and a condo association to deal with while you are trying to unload the rest of the units. Everyone knows how much of a pain HOAs are and building condos means you have to deal with one. All it takes is a few angry buyers to sue for whatever they want and you can be locked up in years of legal battles. I think you are on the hook for 10 years. So people just don't want the liability and renting as appartments makes all thay headache go away.
Viewing a single comment thread. View all comments