Why Florida Condo Rentals are a HARD PASS for Me!

Question

I'm often presented with opportunities to acquire investment condos in Orlando, Miami, and other popular Florida cities.

I always decline.

Read the article below to understand better why "condo" and "Florida" are now a particularly bad combination!

#JustSayNoToInvestmentCondos

https://www.yahoo.com/finance/news/desperate-help-young-flor...

Ash Hegde · Answer

HOA fees are rough for borrowing on investment properties in this interest rate environment too. They can push a DSCR loan into negative cash flow territory which makes the rates even worse. Even though you should be setting aside reserves for future maintenance anyway, you don't get penalized with financing for choosing to do so vs. being forced to with an HOA.

Alice Horn · Answer

From the STR perspective, condos - especially smaller 1- and 2- bedroom units - are also a poor choice in crowded markets like Orlando and Miami. Other than unpredictable HOA fees, your unit will be in direct competition with tens of 1000's of hotel rooms. When we have investors approach us about a purchasing a condo as an investment, we steer them towards a townhome, preferably with a pool, if their budget permits. There are a few notable exceptions i.e. condos near the convention center, but that is the general rule in our market.

Jay Hurst · Answer

100% agree. In fact condo's are pass for me in almost any market outside of traditional condo markets like NYC.

Robert Ellis · Answer

don't say no to co Gp ground up development of condos. get on the right side of the table and not being a consumer. I was just at a capital raising event in New York City pitching miami and columbus. by far there is more interest in miami for development, land entitlement, etc. you also aren't local so I'd discount what you say by like 80%. even if you are looking at "condo" investments, that's about the poorest way to invest in real estate so I'd say just you looking at that says something about your experience level.

Mitch Messer · Answer

I completely get why condo associations need to levy special assessments and increase monthly fees, and specifically in this case to comply with the recently passed laws in Florida.

My objection is to buying these FL condos as possible rental properties.

Buying condos for investment is already a risky proposition. You're entirely at the mercy of the condo board, which could completely restrict your ability to rent at any time. You've got potential issues with noisy neighbors near you and flooding risks from units above you. And then, when you're ready to sell, your buyer can't use FHA or VA financing unless your association is on "the list" of approved condos.

This recent development just makes things so much worse!

So, yes, as an investor I'm a big NOPE on the prospect of being stuck for a $15.5K assessment AND having my monthly condo dues nearly triple from $651 to $1,824!

Greg M. · Answer

I'm not sure why this would be a hard pass for you. It's protecting your investment.

It's pretty simple. Buildings require maintenance. Money needs to be set aside for that maintenance. Failure to have funds for maintenance results in maintenance not being done and that leads to problems like structural issues. The government of Florida (and other states) require building inspections and money be set aside (Reserve Funds) to fix problems so that things like balconies crashing to the ground doesn't happen.

Her HOA has underfunded their reserves. This is a common problem. Every owner wants low HOA Dues and then something expensive comes along and they all cry that it's not fair they need to pay an assessment. These assessments aren't just disappearing into thin air, they will be used for maintenance that will help stabilize/increase the value of her property.

Your SFH requires maintenance and you should have reserves for that. This is no different.

Why Florida Condo Rentals are a HARD PASS for Me!

Why Florida Condo Rentals are a HARD PASS for Me!

Most Popular Reply

6 Replies