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:

1. Is this condo FHA eligible?
2. Is this a warrantable condo?
3. Is this a non-warrantable condo?
4. Is this an ineligible condo?
5. 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

Purchasing a condominium is a popular choice for homebuyers of all ages who wish to dispense with the expensive and seemingly endless responsibility of maintaining a home. Although living in a condominium may allow for some to enjoy a more relaxed lifestyle, there are potential legal hassles involved in buying a condominium that can often make the transaction more complex than buying a home.

Know the Laws Regarding Condo Ownership

In Pennsylvania, as in most states, there is a statute that addresses specific requirements of condominium ownership—i.e., The Pennsylvania Uniform Condominium Act. The essential purpose of the law is to require the original seller of condominium units (often the builder or entity associated with the builder) to fully and accurately disclose the characteristics of the condominium units being offered for sale. This is accomplished by providing the prospective purchaser with a Public Offering Statement. The Public Offering Statement typically discloses a description of the condominium, number of buildings/units, a description of the common elements, list of common expenses and maintenance, the purpose and manner of operation of the condominium association, a description of the declaration, taxes, title and a host of other issues surrounding the creation and maintenance of the condominium.

ALWAYS Review Bylaws & CC&Rs of the HOA

In addition to the Public Offering Statement, a condo purchaser, upon giving a deposit, usually receives the Agreement of Sale, Declaration of Condominium, By-Laws of Association, and Rules/Regulations of the Condominium Association. It is imperative that these documents be reviewed prior to executing the Agreement of Sale (or within the time-frame allowed for canceling the Agreement of Sale if permitted by the purchaser’s particular state statute). Why? They provide significant detail about a variety of issues such as: permissible use of the property, calculation of condo fees and assessments, the cost of certain options and upgrades to a particular unit, calculation of taxes, environmental concerns, etc.

Often times, there are specific restrictions regarding re-sale of a unit and rules concerning home improvements. I currently represent one client who was told by the builder that she could not re-sell her unit because only 50% of all units have been sold at this time. Another client is being threatened with fines by the condo association because he installed hard wood floors in violation of a rule that requires all units to be 80% carpeted. Unfortunately, these clients failed to thoroughly read or have an attorney read all of the pertinent documents previously mentioned.

If you do not read these documents and subsequently violate the rules and regulations of the Condominium Association, you can bet that swift action will be taken in the form of fines, penalties and potential litigation. Most, if not all, Condominium Associations will even secure a lien against your property if the dispute lingers and you fail to pay your fines and assessments.

Suddenly, your comfortable life-style of condo-ownership will have quickly lost its appeal.

Tags: board of directors, CCR, condo, condominium, HOA, home-owners-association

It is great to have the opportunity to interview someone with a good amount of rehabing experience. With rehabbing being the hottest craze in real estate (condotel investing seems like a close second), many people don’t see the reality behind the craze. Learning from pros like Richard, whose interview you are about to read should be helpful to anyone considering jumping head first into a rehab project.

Note: For rehabbing advice, help, etc. please visit our rehabbing forums.

Meet Investor Richard Warren

How long have you been investing in real estate?
I purchased my first piece of real estate, a condo, in 1985 as my primary residence. I didn’t do another until my first rehab project in the early ‘90s, that was my first investment.

What attracted you to becoming a real estate investor?
My background is in financial planning, I was a CFP or Certified Financial Planner for over 15 years. I did a lot of investment planning and estate planning for some very wealthy people. What I found was that most of them had acquired their wealth one of three ways:

1. The old fashioned way (my favorite), that is to say that they inherited it.
2. They had started a business venture that turned out very well.
3. Investing in real estate.

When I saw how people had achieved great wealth using real estate and the leverage available to acquire it, I became very interested.

Are you a full time or part time investor?
I wouldn’t call it full-time because I have periods with a lot of activity and other times where I’m just not finding the right opportunities. But I don’t have a regular job anymore, I left the “rat race” in June of 2005. I do other forms of investing and I have built a fairly successful network marketing business. However, I take real estate investing very seriously and find in very rewarding both financially and in terms of personal satisfaction.

How did you get started investing?
I needed a place to live but I wanted to buy not rent. I didn’t have much in the way of money so I looked for something on the low end of the market. I lived in Long Island, NY, one of the most expensive areas in the country at the time. I had a lot of construction experience from working in my brothers construction company as a teen so I thought “why not find something I can fix up?” So that started my adventure in rehab.

Tell Us About Your First Deal.
That first deal was a bank REO property that needed a major overhaul. I was in way over my head both financially and in terms of the amount of work required. If it could go wrong it did, termites, leaky roof, electrical problems, plumbing problems, you name it. I quickly understood why no one bought it. In retrospect it turned out to be a great learning experience. The thing that saved me was the fact that this was where I lived not something I was trying to flip quickly. I took my time and went room by room, new bathroom, new kitchen, every room was gutted and redone. I realized how much satisfaction I received from doing this sort of work. This house was where I received my rehabbers education. I learned what to look for and what to watch out for and in spite of everything it was still a profitable deal! May next deal was much better. It was a HUD foreclosure that I purchased for 124k, did about 15k worth of renovation and repair and sold it for 300k. I was on my way.

What is your focus (area of expertise)?
As you’ve figured out by now, I focus on rehab. I live in Las Vegas but the majority of my projects have been in the eastern Nevada town of Ely, which is about 250 miles north of here. The Las Vegas market has appreciated a great deal so the cost of doing a deal here is very high. Ely, on the other hand, is a rehabbers paradise. The area had been in a major economic downturn for so many years that houses were not only being neglected but many were abandoned outright. Fast forward a few years and things are dramatically different. A major copper mine has reopened, not one but two coal-fired power plants are being built to supply electricity to Las Vegas and Reno and a large natural gas and oil field has been discovered to the east. Ely is now a boomtown with a severe housing shortage. I was ahead of the curve on this and was buying as many of these old houses as I could get my hands on. I was able to get most of them using my own cash because they were so low in price. Some I have rehabbed and rented while I have fixed and flipped others. The housing shortage has caused rents to rise significantly and there are still great opportunities here. I’ve purchased houses for 20 to 30 thousand that are now worth 75–100 thousand in less than two years and I am still very bullish on the area.

What do you look for in an investment?
As a rehabber I look for three things, structure, condition and price. If the basic structure is not sound I walk away. Next is the condition, does it need extensive rehab or is it mostly in need of cosmetic improvement? I’m ok with either I just need to factor those things in when considering the profit potential. The last thing is price. I look at the potential sale price, the cost of the project and desired profit. From these numbers I determine the price that I am willing to pay, if I can’t acquire a property at a comfortable price I walk away.

How many deals have you done in your career?
All told, I’ve done about a dozen deals. That isn’t a great number but most of those have come in the last two years. I am very selective and do a lot of my own work. Because I’m doing deals that do not have a high carrying cost I can take my time. I hold most of them long enough to be treated as a capital gain rather than ordinary income. I also hold a property as a rental if the cash flow is better than average. The deals I’ve done that did have a lot of carrying cost I’ve worked to turn around quickly.

Do you have your real estate license?
I do have a real estate license, but I do not act as an agent. I have the license to gain knowledge and access to information. I also have the ability to obtain referral fees by passing deals along.

What advice would you give to a beginning investor?
Don’t be afraid to act, the toughest thing to do is pull the trigger on your first deal. On the other hand don’t be afraid to walk away if it isn’t right. I remember my dad telling me that a once in a lifetime opportunity comes along about once a week, the trick is to recognize it, be open to it and, if appropriate, act on it. Another wise man once said that the best decision is the right decision, the second best decision is the wrong decision and the worst decision is to make no decision at all. As the commercial says, “Just do it!” The only way you will truly learn is by doing, I learned so much more from my mistakes than I ever did from my successes.

What was your toughest deal?
My toughest deal was my first, hands down. I was in so far over my head. You learn from your mistakes so I earned a PhD on that one. Funny thing is, it was still profitable!

What would your dream deal be?
I would love to take a historic building and turn it into apartments or condos. I’m actually looking at such a deal now. I’m not optimistic about getting this particular building on terms favorable enough to make it work but there are plenty of others.

Is there anything else you’d like to share with the rest of us?
Watch the money! Money is probably the biggest issue facing a rehabber. There are plenty of deals out there but loans for rehab projects are very costly and can turn a great deal into a loser very quickly. That’s why I try to do as much as I can using my own cash.

As you’re a rehabber, is there anything you’d like to share about rehabbing?
Watch your emotions, they can cause you a lot of grief. It is very easy to get caught up in the excitement and become overly optimistic about what things will cost and how long they will take. Many people have the rehab fantasy, “I’ll just buy this run down house and fix it up and make a huge profit.” Many people watch shows about rehabbing and flipping houses and think there is nothing to it. Remember that these shows are entertainment and there is a lot that they don’t tell you such as real estate commission or financing costs. A lot of people make a lot of money doing this but many more lose their shirt. Take the time to educate yourself and assess your own ability. Start small and be sure that you have the temperament for rehab before you find yourself in a difficult spot.

Additional Information
The following link is to an article in Realty Times about Ely, NV. The reference in the article to an investor on a roof is me and the gentleman being quoted, Sean Brown, is a friend of mine.

Richard Warren
Rich Kat Properties, LLC
(702) 281-3704
rehab702@yahoo.com

Tags: CFP, condo, license, Nevada, real estate, real estate investing, real-estate-license, rehab, rehabber, Rehabbing, Richard Warren

Sorry about the lack of posts lately. I’ve been extremely busy with some projects here and haven’t been able to focus on the blog. I’ll be sure to keep it up despite my busy life! Here’s today’s dispatch:

• The 25 Best Affordable Suburbs in the U.S.
• 10 Questions to Ask the Condo Board
• Distressed Real-Estate: Priced to Sell

Tags: affordable, board, condo, dispatch, distressed, estate, property, questions, real, suburbs, yahoo

Sales records were just smashed by the new Trump International Hotel and Tower Waikiki Beach Walk condo-hotel. Four hundred sixty-four hotel suites were purchased for over $700 million by investors last Thursday. “Developers said the sales set a record for the amount of residential property, both in dollar value and unit volume, sold in one development on a single day. The previous record was set in December 2005 when Vancouver-based Intrawest Corp. sold 318 suites in the first phase of a Maui resort for $425 million US.” The project will begin construction next month, and is slated for completion by the middle of 2009.

Trump has recently become the king of licensing, by selling his name to real estate projects around the country. With to no little investment in these projects, his company is looking more like Marvel Comics (another licensing firm) then a true real estate development firm.

Tags: condo, condotel, developer, Donald, finance, hotel, licensing, sales, Trump