Traditional condo converters most closely resemble the value-add players in real estate: entrepreneurs who try to buy, improve and sell properties in a short time period to avoid operating them. But the condo conversion trend is so hot that it is enticing real estate investment trusts (REITs), which are scrutinized as much for their operating talents as their development abilities.

Executives at Atlanta-based Post Properties, for example, are considering converting properties within the company's portfolio into condos and developing new condo projects, says David Stockert, CEO of Post Properties. While the company is still just exploring the condo idea — one that it would likely undertake with a joint-venture partner — Stockert says the concept is appealing within submarkets where condos and apartments are the prevailing property type.

He identifies Atlanta's Midtown district, a commercial urban area that's attracting dwellers, as an ideal location for a conversion. Post operates two of its newer properties — the 188-unit Post Parkside and 276-unit Post Biltmore — in Midtown. The REIT also owns the luxury 121-unit, 20-story Post Peachtree in nearby Buckhead, which it built in 2001 with the possibility of someday converting it to condos.

“Midtown is becoming a real population center, and the only housing you're going to build there is multifamily or condo — if you want to live there you're not going to have a single-family option,” he says. “In that kind of submarket, I think condos can make some sense.”

Timing, much like location, is everything in real estate. Converters who fail to recognize the cycle's peak risk exposing themselves to financial disaster, especially as apartment owners keep upping the ante. In fact, some converters have spotted rotten deals just waiting to happen.

“There are properties in certain areas we looked at three or four years ago that we decided we didn't like priced at $60,000 or $70,000 a unit,” says Birdman of SunVest. “Today, those same properties are $120,000 a unit.”

Joe Gose is a Kansas City-based writer.