All Forum Posts by: Shawn Q.

@Neems Y. - I like 2% rule properties with good cash flow and long-term appreciation possibilities. If I were to go for a condo I'd see what the escrow fund balance is and do the math on replacing the major building-owned systems, and the last time those systems were replaced and current cost. Then just do the math and see if they have enough reserves for the building. If not, run, don't walk, away from the deal. Because there will be a special assessment soon. 

@Neems Y. - beyond what I mentioned, the main thing you need to deal with is personalities. If you buy a SFR you have to deal with a manager and a tenant. With a condo you have to deal with all the other people in the building, the board, the larger association board, and any vendors who are friends of the various boards.

One consideration of every investment property is the numbers - will it make you money. The other is how much trouble it will cause you. Condos have the potential to cause both considerations to make a deal unprofitable. Ultimately it's what your risk tolerance boils down to. Condos have too many moving parts for me unless the money is very, very compelling. 

@Brie Schmidt - but is it the percentage and type, or just owner-occupied or investor? It's more restrictive if you have to list the prospective method as well as the percentage. Just curious. 

Maybe one of the Realtors here can comment, but is listing the probable loan product required in the offer? I haven't written an offer in a few years, but I seem to recall my contingency was financing, not a specific type of financing. Maybe the offer can be written with a less-specific financing contingency to give more flexibility? 

If/when the loan closes, the seller isn't going to care about the type of product you use, and you should give yourself as many outs as possible. 

I agree with @Tom S. - take the seller financing. In addition to the really excellent equity paydown, you'd be saving the second set of closing costs and giving yourself more flexibility with banks. After a certain number of loans (for my bank it was 3) the down payment % jumps. So you have one bank-backed loan at this point, which would allow you to do owner-occupied financing, which is almost always more generous, on your next purchase. 

You could also owner-occupy the triplex in two years when the owner-financing expires, change to an FHA, and potentially pull cash out and recapture some of that equity for another purchase. As Tom said, as long as your market value is right the seller financing gives you more options now and in the future.

Yeah, we'd need much more detail to comment intelligently, but almost nothing is inherently a deal killer. Foundations are the most likely deal killer, though, in my experience. Based on your numbers you'll want to assess if repair costs for the foundation are already baked in (they aren't) and see whether you think the bank will come down enough to make a full repair (they won't). Then just get a few estimates and see if they bank can match your price. 

Also remember that you're nearing year-end, so they might want to get this off their books before then. I'm guessing they've already decided they'll need to carry it for another year (because it's so close) and there won't be much movement at this point. An all cash offer with a close right before Q1 2018 might be attractive enough to get them to come down, though. 

Before making an offer I would require the seller to release a copy of the HOA financials (most definitely including the building, as most FL condo associations have a community board and a building board - and the financials are usually different). You want to make sure there are adequate cash reserves for maintenance, pest, roof, etc. in the building and community pools - otherwise you'll need to underwrite the risk of a special assessment. For example: if the roof was replaced 15 years ago and there's no roof escrow fund you're looking at a multi-million dollar special assessment down the line.

Condo investing is very difficult, and I would avoid it as a new investor. 

Check with a lawyer and read your policy with him. Seems like a complex issue that would need a professional. 

Seeing all the responses, you definitely need to get your lawyer involved. @Jacob Rhein is likely right, but only a lawyer reviewing the specific documents you have can tell you what rights and responsibilities you have. Do this today, so you can ask these questions before the closing date. As this is such a tight timeframe you may need to hire a same-day process server or courier to deliver any messages. Then just make sure your lawyer comes with you to the closing (if you can find out where it is). Seems like this situation has a high potential for closing-table shenanigans. 

One additional thought - you might want to try calling all the title companies in town and seeing if you have a closing scheduled. I don't know if they release that kind of information, but it's worth a shot (but do this after getting a lawyer). 

Tenant issues are one thing, but a real killer can be capex. I have 3 SFRs that are low-income rentals, and I cash flow quite well. However, I didn't do a great job of calculating in deferred maintenance costs when I was initially purchasing. So, 3 years and 2 bathroom replacements, 2 roof replacements, and numerous smaller repairs/appliance replacements later, I'm up a very little amount net. You're going to want to make sure you have enough cash flow depth across your portfolio to handle ongoing smaller maintenance issues, and that you're reserving enough cash for the big stuff. All that is very, very hard to do when your cash flow is in the hundreds of dollars - a $6K roof can eat a year of cash flow for multiple properties. 

I'm working on a revised spreadsheet for my tracking purposes which I'm happy to send when I get it done. Feel free to message/connect if you'd like a copy.