HOA delinquency rate a cause for concern?

[Haresh Patel]

An off-market deal fell into my lap for a condo in DFW area. I know the seller and this is last of his rental properties. His ask is very reasonable and ~20% below market (basically wants his outstanding mortgage and closing costs etc). He has had a long term tenant (more than 8 years) and tenant wants to continue to live there. Numbers are good, 1.3% of price every month with Scope to increase to 1.6% based on market rates. Property is 10 years old and in decent B minus neighborhood. pretty safe area when you look at crime stats, but not great schools. It's more like multiple four-flexes. 4 two-storey condos on a slab with a common roof. Everything was going fine till the mortgage company raised a red flag. Delinquency rate for HOA is at 28%. it's a small community with less than 50 condos. I won't get a loan on it but seller willing to do a sellers note or financing if I am still interested. Would you buy given the HOA situation? HOA is professionally managed but seems like no incentive to pay since no real penalty on late payers (e.g. 10% every year). Worried about HOA going belly up in case of large repairs like foundation issues. Suggestions/advice?

[Steve Racicot]

@Haresh Patel Get a copy of the budget, and 2 years of Financials. That should tell you what is going on at least financially. If 28% of the community of 50 Units (14 Units) are late or not paying their HOA Fees, then that is a potential problem. After you have the financials, you should attend an HOA meeting or even reach out to the Board to find out what they are doing to resolve the issue. The property Manager may provide you some insight as well.

Do your due diligence, and get documentation or it could cost you lots of $$ in the future, if things need repairs, etc.