Help / Advice about buying a condo for investment / retireme

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Help / Advice about buying a condo for investment / retireme

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Member since 2008 · 3 posts · 0 votes

My wife and I have been thinking (preliminary) about investing in a vacation property. We like the idea of a condo b/c it's low maintance and we won't be spending a lot of time there.

My wife is thinking about Hollywood FL and we have a friend who has a place in Fort Lauderdale but this is in general about FL and can include resort areas like Sanibel (etc..)

One thing we have been hearing the condo / housing market has taken a beating in FL so we figured now may be a good time to look.

I worry that over-building will be a problem new units are being built all the time. Condos (I think) are different than regular homes b/c you can build a ton of them and they don't take up as much land, while a house price may rise simply b/c the location is good and land is being used up (depending on where you are talking about).

I am not looking to make a quick buck flipping the property. I wonder if it's a bad or good investment (buying a condo not used as a rental property). And any help or what to watch out for.

I am not going into this as a major money maker but I just wonder how likely a condo or other vacation property will keep up or ahead of inflation or be about the same as I would make on conservative investing the same amount.

I am just starting to think about this so if you can point out any good things to read or just tips in general it will be greatly appreciated.

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  • Account Closed
    Real Estate Investor · London · Member since 2008 · 3k+ posts · 74 votes
    19y

    As you noted there are some factors that impact the condo value that do not apply to SFR. The reverse is true also.

    I have done very well with a number of condos. I have seen other deals not work out.

    If you are buying to hold long term be sure you can afford to and that the location makes sense. The HOA is critical to any shared ownership situation. Do they have a sinking fund and what has happened in the past? Was the building a conversion or purpose built as that will impact future repairs.

    FL has some weather issues. Are the properties you are looking at any worse off or better off when it comes to weather and insurance?

    What is the ownership mix (age, rental vs. owner occupied, concentration of ownership with a small number of parties)?

    After you work through all the details that are specific to condos it really then comes down to location and other lifestyle factors. If you have a great view unit in a good location on the property with all the pools and other things it will remain in demand. A premium unit means you can get out quicker when it comes time to sell. People in the complex might even want to trade up. I sold one recently where the demand for my unit was higher than for others as that one unit had features that no other unit in the complex had. You pay more on the way in but you have a smoother exit when you eventually sell. You also enjoy the extras in the mean time.

    As you are talking retirement let me put a bit of a bug in your ear.

    You can use your IRA to buy the condo. You can even get a loan if you want but the LTV will be pretty conservative with few lenders offering loans to IRAs. I am not saying that an IRA is best. Just that you can and most people do not realize this. The IRA has to have the ability to deal with future costs, etc.

    John Corey

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  • N/A N/A
    Member since 2008 · 36 posts · 0 votes
    19y

    Rai, I can't tell you much about investment in Florida, but the one thing that I do in any HOA that I consider buying into is that along with the CC&R's, I ask for copies of several months of their meeting minutes. It gives me an insight to what is really going on inside the HOA. It has alerted me in the past to lawsuits in progress and upcoming assessments. It also gave me a feel for the personality of people already in the association.

    Robert

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  • Frank Adams
    Loveland, CO · Member since 2008 · 1k+ posts · 123 votes
    19y

    You don't say how old you are, or how soon you plan on retiring, but some things I can tell you from the "far side" of retirement are:

    Locales change; what looks like a quaint village today might be a major crossroads in as little as 10 years. Ask the people who live in Georgetown and Pflugerville TX about the changes in their town due to a company called Dell.

    Tastes in houses change; houses that I found archetecturally appealing as little as 10 years ago no longer attract me. Also neighborhoods and communities "age" and sometimes do not show their ages well. New always sells at a premium to "used".

    Interior appointments, kitchens, baths etc change a lot. Granted this is easier changed than exterior lines, but can be expensive.

    I think we're probably approaching a "sea change" in utility consumption in the house. Since we currently subsidize the cost of fossil fuels and other energy in the US it's going to be necessary to reduce how much we pay to heat and cool them. It's generally much more expensive to retrofit than to build new.

    all cash

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  • N/A N/A
    OP
    Member since 2008 · 3 posts · 0 votes
    19y
    Originally posted by "all cash":
    You don't say how old you are, or how soon you plan on retiring
    we're both in low 40s and plan to retire in 12-15 years
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  • Joshua D.Pro Member
    BiggerPockets Founder · HI · Member since 2008 · 16k+ posts · 5k+ votes
    19y

    Other than the obvious, when dealing with a condo, the HOA is extremely important to investigate. Do your homework and then do some more. Be sure to READ all paperwork that you get from the HOA, including the CC&Rs. These documents will give you insight on the inner workings of these buildings. If something doesn't smell right with one of them, it probably isn't.

    HOAs have a habit of running things poorly and in the interest of the officers instead of the majority of owners. I've seen some scary stuff!

    Good luck.

    Podcast Guest on Show #100
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  • Account Closed
    Tucson, AZ · Member since 2008 · 945 posts · 45 votes
    19y
    Originally posted by "biggerpo":
    Other than the obvious, when dealing with a condo, the HOA is extremely important to investigate. HOAs have a habit of running things poorly and in the interest of the officers instead of the majority of owners. I've seen some scary stuff!Good luck.

    Ditto that. An HOA (includes condos) is a business entity, a corporation. The board is to run it for the good of the association, NOT the homeowners. Some members of some boards turn "rogue" and run it for themselves and their friends. State laws and the insurance companies protect board members unless their actions are egregious. There is little, if any oversite. Management companies are not exempt from wrongdoing, including theft. A recent example of that is: http://www.azcentral.com/business/articles/0615gr-fraud0615-ON.html

    Though ccr's should limit the dues increase each year, the board can override that with special assessments, and though any greater or special assessment should probably be voted on by the entire membership, boards don't always see it that way, and the voting process is too easy to steal.
    There are ccrs and amendments/additions, and bylaws, financials (which you probably won't get to see until (if then) you can get then, expecially the rearages, fines and dues owed, and any liens or foreclosures, city and state laws, and then there is what the board does.

    One of the biggest problems is selective enforcement of ccr's. Another is dictatorial boards. A third, and another one you really need to be aware of, and may not be able to find out a whole lot about is an empty reserve fund, that will have to be filled, and maybe suddenly, to fund necessary repairs and maintenance.
    Before you do anything, google homeowner association forums to discover some of the problems some homeowners across the country are facing. One of them is American homeowners Resource Center at
    http://www.ahrc.com/new/index.php/src/news

    There is also one for board members and volunteers at HOAtalk. Both show the extent of hoa/condo problems.

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  • N/A N/A
    OP
    Member since 2008 · 3 posts · 0 votes
    19y

    thanks there is certainly a lot to think about.

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  • Account Closed
    Real Estate Investor · London · Member since 2008 · 3k+ posts · 74 votes
    19y

    Check the state regulations concerning HOAs.

    I know that in one state where I purchased a new condo there is a law (about 5 years old now) that requires there to be a reserve fund set up and the costs of all items to be estimated over their effective life. The law has the effect of raising the HOA dues when the projects are first sold as the developer can not set a low level and ignore future work.

    See if there are any state regulations that define what an HOA needs to do. That way you will know if the present HOA management seems on top of their game.

    To be fair, the HOAs are no worse than the average SFR owner who ignores the roof until it leaks or otherwise does not maintain the building. The issue with a condo is you rarely pay to inspect the common areas so really have no easy way to tell if deferred maintenance is building up.

    Checking the minutes is a good start but the absence of issues ini the minutes does not mean there are no deferred maintenance issues.

    John Corey

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  • Account Closed
    Tucson, AZ · Member since 2008 · 945 posts · 45 votes
    19y
    Originally posted by "REI":
    The issue with a condo is you rarely pay to inspect the common areas so really have no easy way to tell if deferred maintenance is building up.

    Checking the minutes is a good start but the absence of issues ini the minutes does not mean there are no deferred maintenance issues.
    John Corey


    I would guess that an outsider would not be permitted to inspect the common areas, except visually. And I sincerely doubt that the minutes of any meetings would be available to an outsider.
    Sorry-edited to add "not" (be permitted to inspect)
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  • Account Closed
    Real Estate Investor · London · Member since 2008 · 3k+ posts · 74 votes
    19y

    I would request the minutes as a potentail buyer. Your legal right to a copy would likely vary by state. I expect the seller can request the minutes and then supply them to the buyer as part of the disclosure process.

    You are correct on the inspection. That is the issues I was highlighting.

    John Corey

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  • N/A N/A
    Member since 2008 · 36 posts · 0 votes
    19y

    In California and Oregon you can sure get a hold of meeting minutes. Also, I considered moving to Las Campanas New Mexico, and they were VERY forthright with supplying me with CC&R's and minutes. In many ways, I find the minutes as critical or more than the CC&R's. You can also request to go to a HOA meeting previous to buying--i've done that too. Talking to the locals may also give you an insight into the HOA. Some do seem to be headed by those who think they were knighted into the position and enjoy making it difficult for residents. Don't get me started.

    in any case, give it a try. Ask your realtor to obtain them for you. The HOA's cooperation to your request could tell you a lot about the personality of their organization.

    Robert

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  • Account Closed
    Real Estate Investor · London · Member since 2008 · 3k+ posts · 74 votes
    19y
    Originally posted by "Robert12":
    The HOA's cooperation to your request could tell you a lot about the personality of their organization.

    Robert

    Great point Robert. Sometimes it is more important to see how someone responds to a question than it is to get the answer.

    John Corey

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  • Matthew Giegerich
    Banker · New York City, NY · Member since 2008 · 75 posts · 1 vote
    19y

    As an 18 yr resident of Fl and investor,I can say that the condo mkt is ripe for picking-lots of overbuilts and foreclosures have the sellers scrambling for offers.Yes the other posters make alot of good points but best thing is to actually go down and shop.

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  • Account Closed
    Tucson, AZ · Member since 2008 · 945 posts · 45 votes
    19y

    This is Texas, I think, but the problems and the way they are handled is nationwide:

    Sun Telegram.com
    Monday, Jun 25, 2007
    Posted on Sun, Jun. 24, 2007
    Homeowner associations flex their muscle

    By MIKE LEE
    Star-Telegram staff writer
    Asa Henry's backyard playground is a kid's delight -- it's at least 10 feet high, with two slides, a fort, swings, ladders. A sign declares it "the private castle" of his two children.
    It also got him sued.

    A few exerpts
    Despite efforts in the state Legislature to limit the power of homeowner associations, Jones has one word for the future of the business: "growing."

    Henry says the subdivision is selectively enforcing the rules.

    Shari DeGroat said her trouble started in 1998 over $730 in dues and fees she doesn't think she owed...."There was no reason to come after me other than just being ugly," she said.

    AARP issued a paper in 2006 recommending a bill of rights for owners, including the right to be secure against foreclosure, for full disclosure of rules and the right to vote on changes to the rules.

    Adolph said it's difficult for average homeowners to fight against the power of developers and well-organized associations.

    "These people roam the halls constantly, giving out money," she said.

    Texans for HOA Reform: www.texashoareform.org

    AARP Bill of Rights for Homeowners in Associations: www.aarp.org/research/legal

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  • Account Closed
    Real Estate Investor · London · Member since 2008 · 3k+ posts · 74 votes
    19y

    People should really assume that an HOA will enforce the CC&Rs.

    John Corey

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