Buying a condo in Alaska

[Kai Sato-Franks]

Hello!

My girlfriend and I are currently in Fairbanks, AK while she finishes up her Master’s degree. We are planing to move out of the AK for a while and come back in time.

We recently got approved for a grant that covers our down payment and the seller agreed to pay our closing costs. So we paid $400 for the inspection for our condo and there’s just cosmetics we need to fix and an update of appliances in time. They just replaced the roof, windows, and HVAC, two years ago. Due to the Covid-19 we haven’t been able to move in yet.

We plan on living it in and fixing the cosmetics and adding the appliances for a year or two.

I'm new to real estate investing and have read about how bad and sometimes good HOA fees can be.

I used the BP calculator for rent and we'd only get about a 5% ROI.

The thing is with us only paying $400 upfront, does that make this a good deal, but only short term?

Our HOA fees is $550 a month. We'll be paying around $1,200 + electric ($70-100) a month. The property was priced at $130,000 and we didn't negotiate and just paid in full because we were uneducated about real estate unfortunately.

2 bed 1 bath with upstairs and downstairs with small fenced yard in a “B”class neighborhood.

[Allen S.]

Hello @Kai Sato-Franks! Welcome to BP... I have looked at some condos in Fairbanks that have almost the exact same numbers as you are describing, and as an investment they were not good at all. Terrible actually. Nice location and layout, but terrible investment. Your HOA is likely high because they use a ton of heating oil in the winter, and with such a large expense, I would also have questions on how the rest of the property and all of the roofs were being maintained. In your situation, my guess is that you're paying as much in HOA fees as on your mortgage, and that's an expense that will never go away!

What I think you're really wanting to know is what makes a good investment. Everyone is in a different situation, but I recommend that do not use "minimum $$ down" as your metric for success. There will be times when that happens, and that's great, but you should be looking for cashflow, appreciation, value-add (which leads to both cash flow and appreciation), rate of return on your investment (ROI or IRR), etc... whatever your metric for success is, just getting to the closing table with as few dollars as possible is not applicable for your long term success.

Best course of action at this point is to enjoy living there, sell when you move, or plan for some monthly losses to cover management and routine rental repairs. While you're there you might also consider getting involved with the HOA to see if you can't get the dues lowered or at least under control...

Good luck!