BRRRR condo purchase with HOA questions

[Robbie Taylor]

This is a potential deal in Lexington KY within a short bike ride of the University of Kentucky Campus. I can run numbers, but I have major HOA questions though.

The Basics

A 2 bed 1 bath condo in a quiet community.   

Sale Price $91,000 (I'd try for $88,000 all cash but most things are going for asking price)

$5000 rehab (flooring, some paint, cosmetics, etc)

ARV $112,000

Rent $1200 (about $600 per bedroom)

Appreciation 2ish% (I go conservative with condos as they don't appreciate like SFHs)

Occupancy rate should be close to 100%.  Nothing sits empty in that area.

My wife is an agent so that'd cut down the real estate fees.

My dad is the source of the $88,000

My goal would be to let it season for a year to collect the cash (there is a lender in Lex who will refi after 6 months at 80% of appraisal.  Go to real estate meetings and you can meet these people).

I'd like to give my dad his $88,000 back after a year without spending too much out of my own pocket. Thankfully there won't be a lot of holding costs since he won't charge me interest and he's not looking for profit. Which brings me to the HOA.

Here is the kicker. HOA fees are $373 a month. It covers Heat, AC, water, sewer, garbage, insurance, snow removal, outside maintenance (that includes painting since they're wood siding) and access to the pool at the clubhouse. I've spoke with other owners there. The HOA has a history of being good to work with and are financially sound.

Should the concept of dealing with an HOA be scaring me off? I know a lot of people on here won't buy with one involved. It seems like a major cash flow drain but it covers a lot of my expenses!

[Brandon Stevens]

I own a number of condos in town including a number around campus. i'd say you are right on the edge of whether it makes sense or not from an appreciation play. Certainly will not be a cash flow play but thats the norm around campus. I would be trying to pass at least $150 of the HOA back off onto the tenant for utilities...because your so close to whether it makes sense or not I would double check all of your figures, in condo communities landlords will be quick to undercut each other especially when it gets close to the school year and your not going to get most college kids to pay much extra for your unit being nicer than anyone elses in the complex.

What about summer months? With so many new apartment complexes offering 9 month leases its not as easy to get year leases anymore, so now you have to account for 3 months of HOA and 3 Months of mortgages at a minimum each year into your figures, then what if you can only get 1k a month instead of 1200, that $2,400 less a year. This doesnt even account for a possible assessment from the association which is expected at some point.....You see how there could be a 5-7k swing on any given year.......Im all about getting into any property with very little of my own $ but I'd run and rerun your numbers on this one very closely before pulling the trigger.