Should Investors Stay Away from Condos
Author: Troy Schuricht • URL: http://www.communityfirstfinancial.comJune 12th, 2008 •
As real estate prices continue to slide investors are eager to find the next best deal. Usually when determining which property they should buy price and rental income become a big factor. Price and rental income usually translate to cash flow and this is the foundation of long term real estate investing.
Let’s look at the condo market and the pro and cons of buying them over other real estate options. The price point of a condo can be very low and investors can usually cash flow on them, but one area that needs consideration is the short term exit strategy. If an investor wants to sell their investment condo they should think about who is going to buy it and what loans are available to buyer to finance them.
Loans on condos are still available, but guidelines have changed that make it more difficult to finance condos with little or no money down. Condos as an affordable housing option for low and middle income brackets are great because of the low price, but a large group of these borrowers need low to no money down on their purchases. Many loans require 10% or more depending on the geographic region, borrower and the type of condo that is being financed.
Here are a few key questions to ask your mortgage professional in helping you with your exit strategy:
- Is this condo FHA eligible?
- Is this a warrantable condo?
- Is this a non-warrantable condo?
- Is this an ineligible condo?
- Does one investor own more than 10% of the complex?
All of these questions relate to whether or not a bank will actually be able to finance your property and some have a higher down payment requirement.
Investors do you home work up front, have a well formulated exit strategy and anticipate the hurdles that your potential future buyer may have to over come.
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Tags: condo, condominium, FHA, HOA, loan, mortgage, real estate, real estate investor
Joshua Dorkin
Charles Feldman
Ted Karsch.
Troy Schuricht
Anwell Tsai
Richard Warren
Jim Watkins
Personally, I am staying away from condos right now. I have better use for my working capital than condo fees, I don’t usually rent but it’s even becoming harder to do that after purchase.
Thank you for the article. I agree, there is just too big risk recently in investing real estate.
We are advising clients to focus on single family homes, unless they have 100% finance already, simply because condo financing is so unpredictable (and difficult to find!).
It is important to consider the buyers being able to get financing if you are looking to sell it in the next few years - though it is always possible to finance them yourselves if you are able to.
I would not personally invest in condo’s right now, nor would I advise a client to. They are quite simply to unpredictable, and there is such an abundance of real estate to choose from right now. It is an unnecessary risk.
The question for all real estate investors is this: How can you get the property sold without going bankrupt in the process?
Ilyce joined the masses and invested in a beautiful condo in 2004. Now that the market has changed dramatically, she provides you with tips for getting the most for your investment property.
To read all of her tips on condo investment follow the link below to the full article on thinkglink.com.
http://www.thinkglink.com/Buying_And_Selling_Investment_Condos.htm
It depends on the location and price of the condo, also what is going on in that particular area, again location and market. Another big consideration is how long you will hang onto the property and can it be easily rented.