First Time Investor: Connecticut Condo Investing

[Dilman R.]

Hello BP,

I am currently under contract for a 2 bed, 1.5 bath condo (recently rehabbed) as my first investment. I offered $267,000 (25% down payment) with seller to pay all closing costs. The HOA is $350 and will eat into any profit margin I was hoping to have. I can market this unit for around $1,800 - $1,900 (high end).

I have reached out to the management company and asked for community policies and any relevant information but nothing from the seller. Closing is set for Aug 26. 

So far, my estimated monthly payment is $1,535.16, which includes P+I, INS, RET, and HOA. If I rent for $1,800, I'm pocketing $264.84 each month but i'm not taking into consideration vacancy cost, capex, repairs + maint. (recently rehabbed), and management (I'm managing it myself).

Only thing is, I have a decent amount of equity tied up. Does it seem worth having $66,700 tied up earning me 4.78% CoC or 11.84% 5-year annualized return? Does this seem realistic for a condo in the northeast?

Also, should I start marketing the condo for rent even though I have not received the financial budget and documents from the Association?

All feedback is welcomed.

[Jaysen Medhurst]

@Dilman R., this is not a good deal and you are setting yourself up for trouble. You are not accounting for Vacancy, Repairs, CapEx, or Management in your expenses. Those can easily eat up 25% of rent on a condo. That puts you ~$110 in the red each month.

• Even if you squeak out a bit of cash flow, what happens if there's a special assessment by the condo association and years of cash flow gets wiped out? 
• Is there a limit to the number of units that can be rented in the complex (there often is)? 
• Is there a restriction on how long a unit in the complex can be rented, e.g. 2 years?

Condos in general are very hard to cash flow due to the HOA fees. Those that don't hit the 1% rule and have relatively high taxes are sure to be a mistake. @Jeff Lamothe is right, your price point can go a long way in many parts of the state.

Find a way to pull out of this deal, tout de suite.