Converters typically search for apartment-to-condo conversions in desirable locations where they won't directly compete with affordable entry-level homes. Rather, converters want to offer an alternative to pricier single-family homes or to costlier condos in new developments nearby.

Developers figure out how much units will fetch and then determine how much they need to spend to improve the property and units. Upgrades are typically made to the property's exterior and common areas. Amenities such as granite counter tops and wood floors are often added to individual units, for example. The upgrades are built into the condo prices. Armed with that information, converters tabulate how much they can pay for a property and still generate desired returns.

Once converters acquire an apartment property, they generally convince about 10% to 15% of the existing renters to buy — usually at a discount to the price outside buyers will pay — before marketing the remaining condos. One key to selling condos is to convince buyers that they are better off owning versus renting, which is done by pointing out the benefits of the current low interest rates, the mortgage interest tax deduction and how property appreciation increases equity, says Robert Kaplan, managing director in Holliday Fenoglio Fowler's Miami office.

“You only need to look at the end-user financing to determine how feasible a project is, and the capital for residential is extremely liquid,” says Kaplan. His office made $650 million in loans to condo converters in Florida last year, up from $200 million in 2001. “People don't want to rent, they want to own, and low interest rates have provided the opportunity.”