Would you Buy This Deal ? 3 Unit Condos in FL

Question

I am going to place an offer on 3 condos in the same building, and would appreciate some feedback from this amazing community. Here are the numbers:

Purchase Price: $105,000

Appraised value: $140,000 (based on my CMA)

Each unit is a 1/1 condo

HOA: $115 per month Each Unit (Includes Insurance)= 350 Total

Taxes: $1,900 3 Units together

Each unit has own meter for water and electric

All Units are currently rented @ $650 Each = Total 1,950

They need about $10,000 in renovation work

The Idea is to put 50% Down Payment to reduce my Monthly PMT and refinance in a few months later (Have very good credit and financials, but don't know many lenders yet) I own other commercial and residential property, but was done thru regular banks.

I Analyzed this deal and managing the units myself, with a 7% Mortgage on the 50%, the unit produces $1,000 dollars a month. After refinancing it, I would have to leave a bit of money in the deal since the refi is going for only 75% LTV (based on my conversation with the bank), leaving me a little over $500 buck a month.

AM I WRONG ON THIS ONE? How would you analyze it? Thanks for the feedback guys :)

John Thedford · Answer

The 1% "rule" seems to be popular. I often look at that when looking to buy. Of course, there are plenty of other factors. Location, age of the structure, rent demand, condition of the property, etc.

James Barnhart · Answer

I don't think this is a very good deal at all.  First, you need at spend $10k as soon as you buy then, so the real cost is $115k.  And, you need to subtract the HOA fee from the rental income, because that is not your money.  So, where is the good deal?  And, you have to put up with the HOA, which I agree is a PITA.

Edward Salazar · Answer

Thomas S. Appreciate your input, and I feel the same way as you about Single Family Homes. I want to place a bunch of low ball offers for a few of these and the idea is to place a higher DP. What do you recommend we put on the contract in the financing section, also say 20% down or no finance contingency? Thanks again

Matthew Rollo · Answer

@Edward Salazar There is actually a local BP meetup here in Orlando. If you want to PM me I can give you the details. We have been meeting once a month.

The market has become so oversaturated in Orlando with people either wholesaling or starting out flipping houses, etc... that in order to get a property under contract now a days, deal or no deal, you have to have some type of creative financing. That or get buddy buddy with the agent selling the house or homeowner depending on if it is on the MLS or FSBO. I would not advise putting more money for EMD then you are willing to lose.

Thomas S. · Answer

Personally I consider condos/HOAs a pita when investing. There is a risk factor associated with the HOA and neighbours, mainly being owners, generally dislike renters and are usually justified in their feelings. HOA fees hamper cash flow to a greater degree that the cost of exterior maintenance on most multi unit investments.

SFHs on the other hand do have much higher maintenance/expense costs per tenant since everything is dependant on only one door to pay everything, This is a much higher risk.

You are correct in that finding any SFH investment with descent cash flow are difficult to find. To produce good numbers you must either allot no value to your equity or ignore all long term expense estimates. These are two of the most common smoke and mirror approaches to cash flowing a SFH.

Jack B. · Answer

HOA is a deal breaker for me. Have one house in an HOA and it's a PITA. They have immense power with little oversight. Backed out of another property because of the fact that it was an HOA. Have never heard a single investor with anything good to say about an HOA, and even if they do now, their tune will change in time.

Matthew Rollo · Answer

@Edward Salazar  You might spend a little more for a SFH but you could still get a great return. Areas around the colleges in Orlando or even up in DeLand around Stetson (which are a little harder to come by)  Deltona typically has a great rental return where you can purchase for under 75k and rent for 1,000 a month easily. The options are always out there.

I do think your numbers work but is it worth 3 doors netting 500 bucks? Or is it worth doing a tad bit more digging for a 1 door netting the same...

Matthew Rollo · Answer

The number look like they work. Let me ask you this though... What if you can get the same return from a SFH (1 door)? Is it more about the amount of doors you have or the ROI?

Edward Salazar · Answer

@John Thedford @Matthew Rollo

I appreciate the feedback and i am going to keep your advice in mind. So I am assuming that to purchase a SFR would be even easier to get banks involved, The idea is to use somewhere in the 50% range as down payment, then refinance it to get my cash out.

Is there a rule of thumb " quick number" that you guys use when looking to purchase a unit? I mean without having to do the whole thing at a first sight, and then when something falls under those conditions, then you analyze it? Thanks guys

I would love to meet (in person) more people interested in what we do, do you know of any groups?

John Thedford · Answer

@Edward Salazar

You can still find those deals. They don't happen often and the guy with cash usually wins.

Would you Buy This Deal ? 3 Unit Condos in FL

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