Rental Property Investor · Oregon City, OR · Member since 2016 · 20 posts · 1 vote
I'd like to get some opinions on a condo deal, which I know few of you recommend. I'm active duty military stationed in Norfolk with plans to move back to the west coast in about a year and a half, which is why I'd like a property that is more hands off. I'd like to purchase something in the market here because it is much more affordable. Here's the deal in which I would owner occupy for about a year.
It's a 65000 condo that only requires 5% down. HOAs are $230.
PITI+HOA = about $670/mo
Current rents in that area range from 900-950. This unit has been updated so I'm shooting for the 950.
After a management company charges about 10%, that will leave me with $180 which definitely isn't much to work with. At closing with down payment and some closing cost assistance I'm only in it about $7k.
Would anyone recommend this due to the low initial investment, or pass it up and wait for something better?
@Blake Burnett- it depends. I basically evaluate the HOA. Is it properly being managed. Have they done a reserve study recently, and do they have the adequate cash flows and reserves on hand to meet the improvement and maintenance needs for the exterior. Odds are unless it is perfectly managed, you will get a HOA due increase in the future and/or an assessment. Capex helps me account for this. So I tend to me more ok on 5% for capex for condos if the interior is recently renovated, but think about the costs to renovated a unit. How much would it cost you do re-do the floors and paint the whole unit, this could be $2-3k.
For maintenance, I would really do 10%. As an example, you could go a year or two without any maintenance issues, but if an appliance goes out, this could set you back $600 or more. That is basically 12 months of maintenance at 5% and doesn't account for anything else. Now if you get something bigger like an HVAC system you could be in trouble only budgeting 5%.
@Blake Burnett - I agree with @Andrew Kerr that there isn't a lot of meat left on the bone here. I think his maintenance and capex are likely low as well, even accounting for the condo nature. Just think about turnover - guessing on materials you're probably looking at paint and carpet on turnover which depends on size but could be in the $200-$600 range per turn (though some of this might be included with the management fee). I'm assuming you're investing near base and marketing there, so your turnover might be higher than usual. In addition to turnover costs, there's AC, stove, fridge, water heater, etc on a longer timeframe. Without accounting for those you'll be upside down in no time.