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Updated over 6 years ago on . Most recent reply

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Dillon Dinglasan
  • Real Estate Agent
  • Bartlett, IL
2
Votes |
24
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Condo as a first investment property?! Thoughts?

Dillon Dinglasan
  • Real Estate Agent
  • Bartlett, IL
Posted

Hello Everybody!

As being a beginner investor I wanted to reach out to the bigger pockets community and hear some feedback on my first investment property! So Ive been recently looking at some condos in the north west suburbs of Chicago. From what Ive read and heared in the BP community condos have pros and cons. I understand that condos high HOA fees and also special assessments sometimes. The reason why I am interested in condos because of the price point. Most SFH, Town homes or multi units are above my price point. I recently got approved for a FHA loan for 110k as a side note. I also considered in purchasing a condo in the city of Chicago as well and use Airbnb as additional income. What are your thoughts?

Would you say that a condo would be a good first investment considering of my price point? 

Thanks for your feedback everyone!

Most Popular Reply

User Stats

340
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Tom Parris
  • Realtor
  • Tampa, FL
247
Votes |
340
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Tom Parris
  • Realtor
  • Tampa, FL
Replied

Hi @Dillon Dinglasan,

I'm unfamiliar with your market, so I cannot speak for the quality of those communities. In my market, condos are easier to rent because Tampa is a younger city, and these communities come with amenities, like pools, fitness centers and decent parking. 

The investment should work for your goals, so as long as it does, go for it. But you must be careful buying condos, and I give some pointers below. 

First off, you may be committing mortgage fraud if you buy with an FHA loan and then use it as an investment property. You won't be breaking the law if you live there and rent out a bedroom. Condos make terrible Airbnbs because your HOA, (which protects the integrity of the community and it's owners) will fine you for doing so until you stop. You're better off renting a room to a long term tenant.

FHA loans are not friendly to condos. It costs the community money to renew their FHA designation with the Fair Housing Administration every 3 years. If you find a competent lender who's familiar with condos, they should be able to tell you where to find a list of them. It is in your best interest to get to 680+ credit and get 5% to put down to get a conventional loan.

Fannie Mae, the government sponsored enterprise who sets loan guidelines has set specific guidelines for lending money to condo buyers. You, the buyer, must qualify for the loan and go through underwriting, and so must the condominium. Those guidelines already protect you to make sure that the community is sound. Your lender must collect the financials of the condo documents and submit a condo questionnaire to the HOA. The answers to those questions will determine if you can get a loan there. Example: Does the HOA save at least 10% to the reserves, is there any pending litigation, what is the renter to owner ratio, does any 1 party own more than 10% of the units, what percentage of owners are delinquent on their dues?

You can put it in your contract that requires the owner to send you the last 12 months of board minutes. If there's going to be an assessment, the owners will talk about it. 

Good luck!

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