Buying Condos for rental properties ?

Question

There is a condo unit near by that has a few "nice" units for about 60k,  I have enough money saved right now to buy two of them with 20% down...... However has anyone had any success renting condo's ?  I know most places have a % of how many can be rented, so I would need to check into this first I suppose.

The area is getting about 1100-1300 a month in rent on a two bedroom. We are near a military base which I work at so I know I can rent them quickly and pretty much know I will get paid each month.

condo fees are 180.00 a month there.

I have a single family rental home right now, and it's currently paying for itself, I will up the rent at next signing of lease, then I'll be making some off of it finally.

I am new to investing and want to start off  as safe as possible before jumping into a three family...   Would anyone recommend buying condo's ???

Andrew Syrios · Answer

We have a few condos and have rented them out. They can work, as long as the HOA is reasonable which it appears to be in this case. The biggest problem I've seen with them is they aren't as liquid and don't appreciate as well as houses. But then again, that's in a cashflow market like Kansas City. I would stay away from them for flips (generally), but they can work for buy and hold in my opinion.

Stephanie Minor · Answer

@Amanda Comeau I also meant to mention that regardless of the voting power that you and other investors may have, not all assessments or common charge increases are voted on. Check the bylaws for that. Also, increases and assessments affect the Board of Managers as well, and are not typically made in haste; they are typically put into place for a budgetary expense of some sort...chances are it wouldn't necessarily be one you would want to vote down if you had the opportunity anyway.

The Association I was referring to in my post has a major safety issue/liability that needs to be taken care of for example, and the funds just aren't there. They have to assess the owners...

@Mary Joe the Board of Managers (or Board of Directors if you are at a co-op) does have insurance against lawsuits, which they are required to have. It is called Directors and Officers insurance, and typically is in place to protect the management company as well. I'm glad you're thinking about that kind of thing before you get involved.

No matter how much the Board tries to do their fiduciary responsibility and have all the homeowners'/shareholders' interests in mind, there will always be at least one crazy person who just doesn't seem to get it. They may try to sue, but as long as no one was negligent and had everyone's best interests at heart, they shouldn't win. Don't let the crazies win!

Being a Board officer or member is a volunteer and thankless job, but if working with the right group of people, you can get a lot of great things accomplished for your community!

If you're not as interested in being a Board Member or attending the meetings, etc. but still want to help out, see if there's a committee you could join or start. For example, a good landscaping committee can really increase the curb appeal of a place. :)

Mary Joe · Answer

@Stephanie  Minor

is it common for the condo or coop owners to sue board members for negligence?  Do board members normally have insurance coverage that protects them from lawsuits if they are being sued for mis-managing the property?

I am thinking of running for board members later this year, but at the same time I do not want to attract unnecessary lawsuits from fellow owners in the building if they feel that I mis-manage the property.   Just wonder if you know how common is it for board members to be sued for mis-managing the property.

Thanks

Stephanie Minor · Answer

I am in property management (condos and co-ops), and if you want to purchase a condo with as few surprises as possible, you need to do some serious due diligence.

Assessments can hit hard and with little warning. Even if you call the management company to ask if there are any upcoming assessments, they may not know because the Board has yet to approve a budget for that year. I manage a condo now that received notification of TWO special assessments about a month or less of being billed for them. And that's because the Board hadn't decided on the correct amount yet because of other things - I won't get into it...but one assessment is for five years. Some people's monthly charges have almost doubled.

Review the Bylaws/rules and regs, review the minutes going back several years (and have your lawyer review them). A lawyer who knows condos will know all the information needed to make the right decision.

Frankly, I don't like the financial surprises that can come with condos, so I'm going to stay away.

Appreciation is typically based on the community as a whole, so even if there's an assessment for work that will not effect your unit, you'll be paying it. Additionally...if you are to pursue condos, consider if you're on the top or bottom floor - leaks can either come from your unit and you'll have to pay for the others effected, or you could have to deal with a leak from above and possibly an owner who is not responsive to it being their responsibility. For example...

Oh, and vet the management company as well...

Aly W. · Answer

My husband and I own several condos in FL, and yes, HOA fees are something to consider. We always have our realtor verify if there are any assessments coming up (and I call the management company myself as well), and we get a copy of the budget. Most of our condo fees have remained stable for several years, but eventually they will go up, as the cost of everything goes up.

We bought them at the bottom of the market, which is recovering very well in south FL now, and rents are continually rising. You just want to be aware that if you want to sell, you may be limited to other investors or owner occupants who will not be using FHA loans. FHA has guidelines about the owner/renter ratios in different complexes, and will not approve certain ones if the renter ratio is too high.

Condos are an attractive option in the area of Ft. Lauderdale that we own in, as SFRs are expensive, insurance is *very* expensive, condos offer amenities that most SFRs do not, and tenants like the no maintenance aspect of condos.

After 5 years of ownership in one complex (2 units), there is a large special assessment coming. It's unfortunate, but SFRs often have large repairs that can't be avoided either. Just know what you're getting into, what kind of rents you can get, what kinds of tenants, and you'll be able to make an educated investment. And have reserves; you'll need that no matter what you invest in.

Amanda Comeau · Answer

awesome...

This is a older condo community, most of them where bought extremely high.. 150-180's back in 2000 and now they are selling for 60-80. however rent is huge in this area because of the military bases close by, and military generally "pays"....   I am thinking as a buy/hold plan for this, also give me some more experience as far as starting my property management llc.... get some more smaller properties under my belt.....  THANKS FOR ALL THE ADVICE : )

Jesse T. · Answer

The numbers look promising.  Take a careful look at the HOA documentation, especially the reserves.  A special assessment could wipe out a great deal.

How long do condos stay on the sale and rental market?

I would be inclined to start out with one unit and then get a second if things were going well.  At that price financing might not be an option and also part of the reason the cost is so low.

Josh Mitchell · Answer

I currently have 2 condo's in a suburb of Chicago. Purchased one for 85k and the other for 88.5k. Both are 2 bed/2 bath and rent for $1,100 each and cash flow each month. Yes, the HOA's do cut into profit, but these were my first two rentals, so it allowed me to slowly learn the property management side of things myself with the HOA handling alot of the tasks as well. To be honest, I am looking to get into SFH now because of the larger returns, and the knowledge I have gained from having these two units. So I would say if the numbers work for you and your goals, then I wouldn't discourage you from doing it. Good luck!

Mike D'Arrigo · Answer

I don't like condo's but if you're going to buy one. Get a copy of the CC&R's and the HOA budget first.

Mary Joe · Answer

$60K condo can get you about 1100-1300 a month in rent???    What kind of neighborhood is that?    I will do it in split seconds if it is in a middle class neighborhood !

Buying Condos for rental properties ?

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