How do you feel about flipping Condos? Who is the guru for Condos?

Question

I have a lady that is interested in flipping condos, I've been taught to stay far away from condos.

How do you guys feel about flipping condos in this market?

Also who is the guru I can refer her to so that she can learn more about condo investing specifically?

Steve Babiak · Answer

You just know that the "guru for condos" (whoever that is) will be saying that investing in condos is the BEST strategy for you to follow ... whether that is accurate or not.

Marc M. · Answer

There are definitely pros and cons to investing with condos, as there are with any type of investing. Like Russell said, you're (usually) not going to have to worry about a new roof, exterior structural or cosmetic maintenance or, in many cases, HVAC and/or HWH. Having said that, I'd consider flipping a condo over renting one personally, due to the exact reasons Russell mentions above so your client may be OK, depending on the association.

If your client does decide to invest in condos for the long term, I would strongly encourage her to make sure the association has a recent (no more than 7 years old) reserve study that breaks out the yearly reserve contribution and make sure the association is budgeting at least that amount, if not more. This won't exclude the possibility of special assessments but it will drastically reduce the chances of them. I'd also chat with any neighbors you can to get a feel for how the association is kept up and how proactive and responsive the board and management are. In many cases, knowing the management company will only get you so far as individual managers can make or break an association. Happy to answer any additional you may have.

Alex Normand · Answer

If I may add, I started my REI adventure by flipping condos up here in Canada. Why? Because for me, they were a lot cheaper to get my hands on rather than a SFH. I also had less to worry during renovations (foundation, roof, windows, etc). This helped as I did not have access to alot of capital when I started out. Out and all, I made a 5000$ profit per property (did two) and they took my 3 months to flip each (acquiring the property, rehabing it, selling and closing).

No, the profit was not HUGE, but I got to generate a bit of money for my next investment, and got my feet wet in the world of RE.

Just my 0.02$ !

Russell Brazil · Answer

I am one of the few on here who will say this but I love investing in condos.  I own SFH's, MFH's, townhouses and condos....and my favorite properties are my condos.  The thing I love about them is they are considerably easier to manage.  There are a lot less things that can break in a condo versus a free standing structure.  I almost never have repairs on my condos, I get great cash flow, and I get really good renters.

That all being said condos do carry unique risks.  The dreaded special assessment is one.  The condo board could vote not to allow rentals.  If the foreclosure rate, or the investor rate gets too high then you will not be able to get an FHA loan on them...and that will in turn almost automatically cause the prices of the units to drop. You have little control over the raising of your condo fee.

Even with those risks, for me personally the pros outweigh the cons.  I also try to insulate myself from some of the risks.  I do not invest in small condo projects, as I believe they are at more risk of the special assessment.  I try to invest in condos with strong financials, to limit the possibility of big jumps in the condo fee.  I also now check with Bigger Pockets member  @Marc M., who works for a property management company who specializes in HOA management, to let me know if the PM company running a particular condo is good or bad.

Kenny H · Answer

I would stay far far away from condo flipping...at least for the Chicago market. Too many condos on the market, unsold buildings being sold to wholesalers is picking up and that will further reduce prices. If for no other reason, you should stay away because they are really hard to finance right now. With no buyers you will never sell.

Rich Weese · Answer

If I was a condo guru and wanted to be very honest, I'd simply say:

RUN THE OTHER WAY VERY, VERY, VERY FAST.

In fact, I have said that in many threads, although buying one single condo out of over 1000 sfrs, probably doesn't make me a condo guru. Rich

Will Barnard · Answer

There have been several discussions about flipping condos here on BP. Here is one I recommend reading:
http://www.biggerpockets.com/forums/67/topics/58144-flippers-be-careful-about-condo-flips

Chris Martin · Answer

My answer to the question How do you feel about flipping Condos? my first thought about William's (OP) lady was 'she might start out flipping condos, but she'll end up flipping burgers'. In my market, I see virtually no opportunity to make this work with traditional means... The market (and hence the odds) are very much against you, so the short answer is just don't do it.

The long answer, as Jeff B points out, is that this investing technique could work. Can someone make it (flipping condos) work? Maybe. I don't know anyone who does this in my area. And I don't want to flip burgers... so not me. But there are always exceptions. If I could buy with cash at 10% of value, fix for $1000, then sell to an investor or owner-occupant with owner financing at $250 less than market rent... all with my SDIRA where I can get 10% down to cover the acquisition cost... then I'd be all in.

Jeff B. · Answer

This is were a knowledgeable, trusted, RE agent, other investors, and a lot of market and neighborhood knowledge COULD pay off.  In South Florida when the housing boom was going on most of the apartment rental communities went condo conversion.  This changed the market and neighborhood demographics big time making an extensive knowledge of each area your potentially going to invest in a necessity.

The area that I've had the most success with is one I lived in prior to investing.  It is one of the undervalued areas that had great local amenities, close to work, shopping, interstate, beach, reasonably priced, fairly new housing, the neighborhood's common areas are maintained by an association.  If you can find a neighborhood that has a long track record of ownership or renters and is desirable by many, with some but not a lot of availability, and whose condo association and fees are reasonable then you should have some success.  Just be aware of the extensive knowledge you will need and that even in a 4 story building being on one floor versus another could be a 5% price difference.

How do you feel about flipping Condos? Who is the guru for Condos?

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