Move condo investing from the no pile to yes?

Question

I tentatively type this post, as I normally cringe at the thought of investing in condos due to the lack of control over several variables.

However, since our market is hot and inventory is low, I'm staying open to all options. There is an affluent vacation area nearby, where long-term rentals are in high demand and extremely scarce (think--how much do you want for that closet, and will a futon fit in it?). I connected with an experienced agent that specializes there, and am looking at some condos with good locations, stable HOA's that she believes would be easier to sell than others.

I'd be interested to receive feedback on the good, bad and ugly to help me in my research. I enter into this as a skeptic, but willing to learn. If you run screaming from the thought of a condo purchase, please share your reasoning so that I many learn from it. Had a good experience--love it!

I'd likely be going for something that needs some work, would consider short sales and REO and would also factor PM fees into costs. A rough first pass shows typical HOA fees in the area running roughly the equivalent of 3-4% of purchase price.

Scott McClelland · Answer

Owning a condo as a rental is fine but there is a little more homework that goes into it. Be sure to review the condo/HOA rules before purchase (you can put this in your offer) since it is possible for some of the rules to make renting a little more difficult (some may require a professional PM company, etc.). The HOA fees are a worry but if you can buy it cheap enough and have strong positive cash flow it shouldn't be too big of a concern.

Best of Luck,
Scott

Best of Luck, Scott

Ned Carey · Answer

You description says rehabber but the post is written as if you want to hold them as rentals, big difference.

I know someone who was rehabbing condos and reselling them. They were quick and easy rehabs. This could be a great strategy in the right market.

I would not hesitate to hold a condo as a rental but only if I could buy it dirt cheap because of the risk of raising HOA fees.

The biggest risk here is the financial stability of the HOA. In order for buyers to get financing the condo needs to be approved or certified by FNMA (that may not be exactly right) Due to foreclosures, HOAs often are not collecting enough HOA dues. Good luck - Ned

Page Huyette · Answer

Richard P how do you factor in HOA fee increases? Do you base it on previous increases from the complex or???

What other expenses would I incur that would differ from SFR or multi-family investing that are unique to condos?

Richard P · Answer

Hi Page,

I have experienced nice returns on condos over many years with prudent due dilligence. I prefer nice modern units with distressed sellers allowing the "opportunity" to purchase at a price point significantly below market value.

Take care,

Richard

Move condo investing from the no pile to yes?

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