Orlando, FL · Member since 2009 · 2k+ posts · 282 votes
I've read a lot of negative things about buying condos for rental. But even though you would pay somewhere between $200-$400 in monthly maintenance fees for the unit, isn't that offset somewhat by the fact that you won't be paying for big ticket repairs in the future, like a new roof (or if you do, it's spread across all the condo owners as a special assessment)? As well as the fact that you never need to do any exterior maintance, or dealing with tree, fence and driveway problems?
So, for example, I buy a condo for $25K that has a $300 monthly fee, and will rent out for $700/month.
I subtract off the $300 and pretend the rent is $400/mo. for argument's sake. Do I still need to apply the 50% rule to that $400/mo., or is it more like the 20% rule now? From what I can see, the only costs would be insurance, property taxes, possible eviction, and minor repairs to plumbing, new carpet every couple of years, painting.
Real Estate Agent · Grand Junction, CO · Member since 2008 · 68 posts · 35 votes
16y
I don't think many HOA's budget correctly for future repair items.
When buying a condo, ask to see their Replacement Reserve Schedule & Replacement Reserve Fund.
This should show what items they have identified to fix, the life expectancy of each item, cost to fix (which is just a guesstimate) and how well they are doing putting the required yearly amount away for the items to be fixed.
Some places may jus say we have $20,000 in reserve and Buyers think great, that sounds like a decent amount of $$$$. But, this means they HOA has no idea how to budget as they don't have a proper Replacement Reserve Fund that ID's items and life expectancies and so on. Thus, when the roof goes, and it costs $50K to fix, the $20K doesn't sound so good anymore.
I don't mind HOA's actually, but some are not set-up well budget wise.
Investor · Chattanooga, TN · Member since 2009 · 1k+ posts · 903 votes
16y
HOA fees do not cover unexpected expense, nor are HOA's generally all that well capitalized either these days. That means that in addition to paying your monthly fees, you could still get hit with a special assessment to cover that roof that you thought you were paying for all along. You still have inside maintenance, insurance, taxes, vacancies, management, etc., to deal with. That's going to eat up a lot of the remainder.
Real Estate Agent · Grand Junction, CO · Member since 2008 · 68 posts · 35 votes
16y
I don't think many HOA's budget correctly for future repair items.
When buying a condo, ask to see their Replacement Reserve Schedule & Replacement Reserve Fund.
This should show what items they have identified to fix, the life expectancy of each item, cost to fix (which is just a guesstimate) and how well they are doing putting the required yearly amount away for the items to be fixed.
Some places may jus say we have $20,000 in reserve and Buyers think great, that sounds like a decent amount of $$$$. But, this means they HOA has no idea how to budget as they don't have a proper Replacement Reserve Fund that ID's items and life expectancies and so on. Thus, when the roof goes, and it costs $50K to fix, the $20K doesn't sound so good anymore.
I don't mind HOA's actually, but some are not set-up well budget wise.
I don't think that HOA fees are the big problem with condos.
The big problem is that the HOA will have lots of rules and might fine the owner for violations (that's you). The tenants don't give a flying rip about complying with any HOA rules.
Also, to a tenant, a condo is simply just another apartment. So there is no advantage in offering a condo for rent.
Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
16y
As I've posted many times before, when it comes to condos,,,,,,,,,,,,,,,,,,,,,,,,,,
RUN RUN RUN the other way VERY fast. There are so many reasons. The big reason is the unknown on HOA. There will always be "special assessments" and these can be HUGE. Roofs, pavement, etc. These are not small amounts. Rich
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
16y
Hi, my rule is very similar to Rich's rule, mine says don't even look at them in the first place! Unless you can out vote all the other owners, don't even consider them, IMO. You'll have enough problems trying to control your own properties with city and county regulations, without having to deal with "homeowner" condo-types. Bill