Advice on Off Market Condo Deal

[Adalberto Jimenez]

Hey everyone,

I was presented an opportunity to purchase a condo in this apartment complex. It is a unique situation because originally the developers were selling it as condos and after the market crash they switched it to just rentals. So now there are 5 condos owned privately and the rest is owned by the developers. Do you think this is adding value or devaluing the condo? There are no rental restrictions.

I would be acquiring this condo at a steep discount, and is in very good condition.

Zillow Zest is 293k i would be coming in at 200k.

It’s a 1bd 1bth. Im thinking I can buy it, refinance, then rent or Airbnb.

This is in Atlanta, GA. Just curious to hear other perspectives.

Thanks!

[Mitch Messer]

Hi @Adalberto Jimenez.

I'm not a great lover of condos, so I'll just recommend you consider the following factors very carefully:

• Financing - The requirements for obtaining condo mortgages can be very different than that for fee-simple houses. Some loan programs, like FHA, restrict which condo associations do and do not qualify. Make absolutely sure your lender and underwriter will not have any difficulty lending here.
• Ownership - Unlike with fee-simple houses, with a condo you own a stake in the association that actually owns the physical units. Are these 5 condos organized as a single association, with a board and bylaws and such? If so, you'll want to deep-dive into the details to see exactly what you'll be getting into. For example, just because there are no rental restrictions today doesn't mean new ones can't be ratified and imposed in the future.
• Overall Market - People flock to Atlanta for the great lifestyle and for more elbow room than is available in big cities in the Northeast and out West. Condos are therefore an oddball product in a market that generally assigns single-family houses greater value. It's been said condos are really easy to buy and devilishly hard to sell.

I've done four condo deals in my entire 20-year real estate career (I'm a slow learner, apparently), and I've gotten burned every single time.

Just sayin'.