Should I stay the heck out of this one?

[Kai G.]

I've been looking for a buy-and-hold in the local area (Seacoast of NH), and I have trouble finding places in decent neighborhoods that offer a decent cap rate.

I've just looked at a foreclosed condo in what used to be a big apartment complex, which apparently converted to condos. It's in decent shape (mostly needs paint, some water damage in the kitchen ceiling, time for new appliances), listed at ~ $100k. I actually think I might be able to get the place at ~$75-$80k. Other (updated) apartments in this complex are advertised for $1200/month, so that's looking good.

But there are a bunch of red flags:

- condo fee has kept going up every year: $180 -> $225 -> $275 -> $325 (2016)

- the place was apparently poorly managed / not maintained, they're now doing major work (new siding, new parking lot, ...) I just learned there is a $2500 special assessment for the parking lot coming up. There's already been some special assessments (< $1k) in recent years, and with the siding etc coming up, I expect another one to come next year.

- It seems some investor has been buying up almost all units (most of them were owned by the original apartment complex, anyway, only a few seem to be owned by individual owners). Obviously, they control the condo association (I think they own like 90% of the units), but I suppose they still have an interested to make this place survive.

- I suppose it's not possible to get conventional financing because of the investor concentration above, which means it'd be probably hard to get out of this deal.

- I think the place has been nearly (or actually) bankrupt, and the association has no reserves.

- The only recent "comps" I can find is the large investor buying up two units which had been previously foreclosed, then owned by another party for a couple of years. Those were sold at $75k each. The investors bought the majority of the units in 2013/2014 for <= $45k (in package deals from the original complex, I believe).

Should I run from this? Most signs seem to point that way. On the other hand, the rents seem decent, and if that complex managed to pull out of the bad times, I could see a lot of potential upside, in particular if the condo fees get back under control. The unit I looked at last sold in 2006 for $140k.