Condo analysis???

Question

Bill Jacobsen · Answer

The main difference is the HOA and what does it cover.  I own a number of condos and the HOA fees range from about $225 per month to $740 per month.  I analyze  like a single family but then subtract expenses paid by the HOA.

You are usually responsible for inside expenses.  The HOA for outside things.  That may or may not include the roof.  The HOA sometimes pays for some insurance.  Make sure you find out what their insurance covers.  The HOA sometimes pays for some utilities.

I usually budget $2,000 in maintenance/capital expenses for a 1,500 square foot house.  If the HOA pays for outside maintenance including roof I would cut that number in half.

Best to you.

Bill

Dmitriy Fomichenko · Answer

@Karan Nanda

If you decide to use SD IRA to buy a property it can be used for investment purposes only, you can not gain any personal benefits from it, nor can you do any work on the property yourself.

It is possible to finance property in your IRA but you have to use non-recourse loan since providing personal guarantee is prohibited (conventional loan). Most lender will require about 40% down on such investment and will have minimum loan amount of about $50K.

Karan Nanda · Answer

Just starting out and am looking at my first Investment property.

I am confused between single family homes vs a condo.

What is a better bet for a buy and hold investment and I want to rent it out.

I  want to take it as a learning experience so I was looking at low cost  investments. I saw a 3 bedroom condo with 1.5 bath built in 1971 for  $18k. The price seems comfortable to me. Wanted to understand more about  condo buying before i spend any more focus on these kind of properties.  It has a condo fee of $210 and mortgage will be less than $100, is this  normal. Is the condo fee going to cover for property management and  maintenance/repairs? What is this fee for.

On the other hand,  could not find any SFH for this price range apart from tax foreclosures  and all which I don't know if they will be a condition to rent or need a  lot of work.

Any suggestions from the experts?

I am looking for this as my first investment and am looking for a buy and hold to use it as a rental property.  The price point looks attractive to me so I am interested. I am told  that it is rented at 750/month and has a condo fee of $210. Its a 1971 building so am scared of the condition and repairs needed. Any exit strategies suggested.

Also  I am being told that the seller is motivated and will compromise on the  price and will cover all closing costs. So just wanted to know if it  makes sense to give a low ball offer like 12-14K just to safeguard  myself against the unknowns. Any ideas if a motivated seller having such  an old apartment would be interested in accepting a low offer like this  and if it still makes sense for me.

Also, 1 last question, can i  use a self directed IRA for a buying such an apartment and how does it  work. Can i just pay the 20% downpayment from my IRA and get the 80%  financing from a bank/lender all within the IRA.

Thanks for helping a newbie.

Bill Jacobsen · Answer

I would be glad to give my opinion.  Remember that it is only one persons opinion.

The best to you.

Bill

Derrick O. · Answer

@Bill Jacobsen

u seem to know what u are talking about could I shoot you some numbers on a potential beach front condo investment and tell me if your think it is a good investment or not

Marc M. · Answer

I agree with @Bill Jacobsen in determining what the monthly assessment covers. Generally, electricity is separately metered (you/your tenant pay it directly) while gas and water are paid by the association through your condo fees. There are exceptions though. Beyond that, you will need to check the individual governing docs to determine what the association is responsible for and what the unit owner is responsible for. Look for a "Duty to Maintain" clause, though it may be called something different in your association.

Quick point on the insurance: associations are required to insure the building structure and common elements, however, this insurance does not extend to individual units or personal contents. While it was a good idea before, DC just started requiring that condo owners purchase a homeowners policy for their condos. Keep in mind that you may be responsible for the deductible in the event something in your unit causes damage to another unit or the common area. Homeowners insurance is fairly cheap and can be the difference between a net surplus at the end of the year or a deficit.

Alex Silva · Answer

hi Gabriela,

I bought a condo 2 months ago and this is the

Formula I used.

Price $49k

Hoa $228

Taxes $58

Rent $786

Cash flow $500

I am trying to get 1% out of the purchased price after condo fees and taxes.

The vacancy rate for this unit is 0%. Ido have 10 people on my waiting list and the renter has been there for 4 years and don't want to leave. But, I had to increase the rent because it was below market and still. But the renter takes a good care of the unit.

Condo analysis???

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