Rent or buy a risky condo

[Brendan Murphy]

I need some advice.

Let me start by saying I found a condo in my area (Boston) that I was under contract to buy. It was a 1 bedroom, 1 bath, and I was excited to not have roommates any more. My mortgage, fees and budgeted maintenance expense was about $1,600 monthly. Rents for a similar apartment would be around $1,700-$2,000.

A few days from close, my attorney discovered the town had a lien on the condo association (80 units) for unpaid water bills of $86k. When I investigated that with the property management company, the president of the company claimed that when they first took over management of the property there was about $500k in debt and over the years they’ve slowly been crawling out of debt, and that $86k is actually really amazing considering where they came from. He also said they elected to not pay the water bill as part of their debt repayment plan and that by February 2021, they will finally be debt free. He claimed that they were under budget in a few areas and that with small special assessments (less then $1k per unit) the debt would be completely paid off. This made me feel better about the situation, considering it seemed under control, but I’m an accountant and I wanted to see the associations financial statements to corroborate his claim that the debt has been getting paid off over the years.

The president said that wouldn’t be a problem and then over the next several days he wouldn’t respond to us. Finally, the business day before we were supposed to close, he sent me budget-to-actuals. I followed up and requested the income statement and balance sheet. He then sent over the income statement but refused to send the balance sheet since that’s their policy that they won’t send the balance sheet until it’s been reviewed by a cpa. For those familiar with financial statements, you know that the balance sheet is what’s going to show me the balance in debt over the years, and so that was really the main statements I wanted to see. I asked who’s policy that was and explained that it was necessary as part of my due diligence and he said it was the property management company’s policy, not the home owners association. He has no right to do that. I know that I caught him in a lie and that he’s refusing to provide me documents that would expose him. I’ve also heard several people at the association complain about how bad the management company is. So, as of yesterday, I’m backing out of the deal.

My question is, however, my other alternative is renting. My current lease is ending 8/31 and I’ll likely be paying ~$2k per month in rent until I buy a place. And given my ideas on the current market, I’m probably not going to be looking to buy again until around next spring/summer. So my question is, is it worth renting for the next year and paying that kind of money into rent expense, or would it be worth negotiating perhaps a cheaper purchase price with the poorly managed condo? My thinking is that as long as I don’t lose more than $24k on the condo (equivalent of 1 year of rent), then maybe it would still be worth buying rather than renting.

Any advice would be appreciated.

[Nick Riccio]

@Brendan Murphy it's absolutely your call, but I wouldn't touch this deal. Why put yourself in that situation when you already know what you're getting yourself into. Don't let the idea of paying rent force you into something you don't want to do. One more year of rent is not the end of the world. You can also use the year to get finances in order, get pre-approved (again), and really nail down your budget and desired neighborhoods. I think you made the right move and wouldn't feel pressure to buy just to avoid paying rent for another 12 months.