Non warrantable condos

[Matt DuSold]

I'm in very initial stages of looking at a property that is non warrantable but obviously don't have all the cash to put up for it. So I was trying to think of some ways around it. I know there was a post on here over a year ago about these but I didn't know if anyone has had experience with them lately? I hear that loans are getting easier to get for them.

If anyone has had experience with these types of properties I would love to hear about it. This is actually a very nice property but the amount of forclosures in the building has killed it. I believe the status of the building can change if it passes the whole check list to become warrantable although I may be incorrect about that, which would concern me about retail value.

Obviously I don't know too much about non warrantable properties but wanted to look into it. I didn't know if it really is that bad and something I should run away from or if no one has that much cash to come up with in order to make the purchase. Any help is appreciated!

[Rob C.]

Financing can be found on non-warrantable condos, but it's not very appealing. At least not right now. Bank of Internet and some credit unions will do these as portfolio loans, but they'll require at least 30-50% down and the interest rates will be above 6%. Has anyone else found anything better than this?

Most folks here bag on condos. I'm torn on them, particularly the non-warrantable condos. There is some pretty big upside potential on them given that FHA appears to be in the process of changing its rules to be more accommodating of them: http://articles.latimes.com/2012/may/20/business/la-fi-harney-20120520.

On the flipside, I wonder if we will see many condos end up being just as much a disaster of an investment as timeshares. If a complex is poorly managed and HOA fees continue to soar, the condo owners may end up looking for people just to take them off their hands (as is often the case with timeshare owners who want to walk away from the maintenance fees). Granted, much of the reason HOA fees have soared over the past couple years is because of all the vacancies / delinquencies from foreclosed / distressed owners. I would guess that HOA fees will go back down a little bit for a little while once all the shadow inventory eventually clears out, and the complexes fill back up with owners who are paying their dues. But again if the HOA management is incompetent (as many seem to be), then HOA fees may never go any direction but up. And the question then becomes: can they outpace inflation? outpace rents? The latter case would be disastrous. Anyone else have any thoughts on this? I'm just getting into this industry myself so I don't want to give any impression that I've got the answers; rather, I just throw out thoughts and questions to stimulate discussion from the seasoned pros on here, who do know what they're talking about