BULK CONDOS VS APT

[Howard Salpeter]

I have an opportunity to buy 12 condos from a bank--the owner converted them into condos & tried to sell them, unsuccessfully-- they are in a predominantly rental area of DC, now the bank wants to unload them. I am having trouble evaluating them & want to know what the experienced folks out there think of condos, condo conversions & this type of deal.

[Steve L.]

Is it 12-unit building? Or did he sell some of them and it's a 20 unit building with 12 units available?

I think eventually you will be able to sell them and if you can control the board it will be good. But you have to be ready to fund reserve accounts and all that good stuff.

[Howard Salpeter]

Steve,

There are 12 buildings, these are in 3. The rest are sold. Is it worth a low-price purchase & hold as rentals for 5-7 yrs, or does the condo aspect make it too difficult?

Thanks

[Jon Holdman]

Condo = HOA = a uncaring, unsupportive partner to your investments.

Do you mean there are 12 fourplex buildings, and these three are three of the buildings? Any chance to separate them off, if so? Or, do you mean there are 12 larger buildings and these 12 units are scattered throughout three of them? How big are these buildings?

Price? Rents?

[Account Closed]

Originally posted by Howard Salpeter:

There are 12 buildings, these are in 3. The rest are sold. Is it worth a low-price purchase & hold as rentals for 5-7 yrs, or does the condo aspect make it too difficult?Thanks

Absolutely not. First, a condo is (probably) a corporation, run as a corporation, under state and local law. Condo boards are generally run (as are hoa boards) by control freaks, and for THEIR good, not yours. Even if you were to get on the board, you would have almost no say, unless you were the biggest control freak of all, and well liked by the other board members. (Of course, maybe you are, and would be)
Second, that you can buy 12 units is a red flag.
Third, (it used to be, so maybe still is) a lot of condo owners did not pay the assessments, so major repairs and maintenance had to be deferred. Rentors really don't generally care about someone elses' property.
The mortgage holder may not permit all of them to be rented. Hoas and condos can generally have only a certain percentage of rentals, because beyond that number. people don't want to buy and live in it.
think PROJECTS.
Fourth-the price to purchase condos is usually fairly cheap, and even the dues advertised is probably fairly cheap--the first year. The dues are quickly raised, making owning condos very expensive, and one reason a lot of people won't buy them if they know that.

Fifth if the former owner couldn't sell the units, you probabaly won't be able to eitiher.

Good luck with this. I think it's a really bad thing to do.

[Howard Salpeter]

Thanks for the input. They are 3 4-plexes & I am going to see if I can split them off (probably not likely). I am also going to look at the condo docs before moving forward.

[Account Closed]

You also need to check ALL the financial documents, including year end (fiscal) reports and Reserve Fund study and related information. How old is the reserve study? Have they done any of the updates?
Check numbers of people who are in arrears and the amounts, individually and total, and how they handle that, the repair and maintenance logs, and estimates for needed work, what still needs done that is not part of the reserve study.
The condo docs probably include articles of incorporation, bylaws, ccrs, financials, and a "rules" book. Many associations do not record, at the county level, changes in the ccrs because of cost, so the have a "rules" book. You really need to know about how the assessments are done, how often they are raised, everything about them.
You said you want to split those properties out of the condo group. Read state and local laws, and the articles of Incorporation and the ccrs. You may find info under headings such as terminating the association, amending the ccrs, dissolving the association. If you have common area with the others, it may not be possible. You may need an attorney if you choose to go through with this. Do NOT get one associated with Community Associations Institute (CAI) or any of its offshoots. They work for the associations.