Condo with 45% delinquency rate woes

[Brandon Russell]

Hi All,

I'm in the process of purchasing my first property. I live in the Washington DC area and am looking at properties in the city. I've just recently put an offer on a condo in an up and coming neighborhood (Columbia Heights) that I felt was the right choice. After winning out in a bid situation against a cash offer and another that wanted help on closing costs my offer won. I'm attempting to finance the property using a 5% LPMI option. Everything was going fine until after reviewing the condo docs we found out that the property had a 45% delinquency rate for the tenants on condo dues. I also discovered that the seller owed $2000 on their condo dues as well. I'm not sure why they didn't take the cash offer as no one will really be able to finance this property with that delinquency rate. The seller won't bail out the other owners which I expected. So I have to back out of the deal.

The issue is this, I really like this property and feel it could be a good investment. My goal is to owner occupy the property for a few years do some renovations, then possibly rent or sell. My goal is to help use it for cash flow so I can buy my next property. However, now the lender won't finance the property due to Freddie/fannie 15% restrictions on delinquency rates. I know the high delinquency rate is a bad sign for the condo association, but I'm guessing all the owners are upside down and the condo association hasn't made the move to foreclose on the properties (which is difficult in DC as of late). At some point this WILL happen and I will have missed the opportunity. Due to the location of this property and price of comparable homes in the area I feel it's value would greatly appreciate if the building and condo assoc were in better order. I'd like to affect that change but I guess I can't without cash.

Do I have any other options if I don't have the funds to by in cash? If not any suggestions on what I should look for in my first property. I'm interested in something I can live in but it needs to be close to amenities and the downtown area. I only can afford about $280,000k with financing. I don't intend to stay in the area forever but I'm looking for something that can be downtown and accessible for someone who is single living in the area. I'm not so interested in Single Family Homes as I'm priced out here in the city and I also feel condos can actually yield more than investors speculate in Washington DC. DC has the highest ratio of single to married individuals in the country and I think condos here are a bit more popular in such a transient area such as this. I know SFH are much more lucrative but I simply can't go that route as I can't afford it at the moment.

Any opinions?

Thanks!