I asked about this deal last December and didn't get any feedback. The seller evaporated and now she's come back ready to sell. Are my updated numbers right? Do rehabbers shy away from high HOA fees?
Condo, in Madison, CT (an affluent community on the water - not Fairfield County) Complex has good reputation and distant views of Long Island Sound:
UNIT: 2 bed 2 ba 1,836 sq ft. cathedral living rm, 4 season sun room finished, walkout basement, 2 car attached garage. Built in 1996. Kitchen flooded spring 2014 kitchen and was replaced w/ all low end stuff. Middle unit.
HOA Fees: 650 mo. (this is on the higher end of normal for this area).
2 bd 2 ba SOLD 11/21/14 for $180K - 1,160 sq ft smaller and foreclosure bad shape
2 bd 2 ba SOLD 12/10/14 $350K - 1,374 sq ft. smaller but end unit fully updated w/ finished basement
3 bd 3 ba SOLD 10/15/14 $390K - 1,542 Sq Ft fully updated w/finished basement
CONSERVATIVE ARV: $330K could be higher right????
MASTER BATH $7,000
2ND BATH $2,500 (has good tub/shower unit)
CARPET FLOORS $3,500
15% OVER -$3,975
70% ARV $231,000
Wholesale fee - $10,000
Max Price $190,525
Am I not moving on this because I'm afraid to take action or am I afraid this isn't a good deal? Please help me out!
Hi, @Kim Handelman - a few thoughts on what else to consider. First, what's the market like for condos in Madison? They're a pretty slow sell here in southeastern CT. Do you have Days on Market included in your comps? Seeing as you plan to wholesale it, do you know any buyers who flip or otherwise invest in condos?
It's hard to tell whether the ARV is accurate because I don't know whether the comps are coming from the same building, similar area, etc. Here in East Lyme, which is not as affluent as Madison but still considered an upscale town, the condo complexes can vary widely. You really need to know the nitty-gritty about each.
You mentioned that it had flooded during Hurricane Sandy - could be a big red flag. Are potential end buyers going to purchase a property that flooded? How about the cost of insurance?
And finally, concerning the HOA, I personally would view it like taxes: if I bought it low enough and the monthly payment makes sense, then who cares? However, many buyers do balk at these things. But if $650 is aligned with similar condos, it might not matter so much. How does it compare to the HOAs of your comps?
Hope that helps. I'm not trying to talk you out of taking action, just pointing out some things that caught my eye! Good luck!
As far as HOA fees go, it depends on what the goal of your end buyer is. If they're going to flip it then it may not be as big of an issue. That being said if your flippers sell to buy and hold investors, many like to avoid condos for the exact reason of unpredictable/unreasonable HOA Fees. If they sell to anyone including your average homeowner they may not have as much of an issue.
1. Where are you pulling your comps from? Same building? If not, what are the HOA fees there?
2. Is flood insurance required? If yes, how does that compare to the rest of the market (i.e. are there many areas in Madison in no flood zone areas, which will make this a harder sell).
3. How do these HOA fees compare to others?
4. Assuming the assumptions in your calculation is correct (repairs cost, ARV, etc.) I think your calculation looks good.
Some possible advice might be to locate a local Realtor with an EXCELLENT knowledge of the area, and that you can trust. This might help get your first deal done, even if you need to cut into your profit. Doing a deal will propel you so much that in my humble opinion it's worth every penny (or in this case 500,000 pennies if you split it in half). Also, the Realtor might have a buyer for you too.
Thanks so much you two!! The unit flooded because of a broken pipe, it's no where near the water. The condo unit is on the outer circle of two circles of units that surround an old Mansion with a pool that sits atop a hill. I talked to a realtor that knows the area and she said the lower loop may have a slightly lower "Status" but she said all the units are nicely placed and that rarely comes up. She said that the units that are updated high end sell well but may need to sit on the market for a few months right now. She also said that the type of people that want the units with high end updates don't care about the higher HOA fees. Just checked, the exact same unit with pretty new updates is on the market (9 days) for $345K so I'm hoping my numbers are good. UUGH, why does my first live lead have to be a condo!
Congrats @Kim Handelman on what looks to me like a great lead!! The numbers make sense to me, now you just need to find a rehabber in the area! Good luck!!
Congrats sounds good!!
I would personally add $3,500 to your kitchen appliance costs.
I would also add $3,900 for additional holding costs to cover 6 months of HOA.
Little stuff, but your rehabber will appreciate it 😊
Thank you @James Lehmann this is exactly the kind of input I need. The homeowner who asked me to give her a price isn't returning my calls - Oy Vay! If she resurfaces I will have a more accurate quote!
Free eBook from BiggerPockets!
Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!
- Actionable advice for getting started,
- Discover the 10 Most Lucrative Real Estate Niches,
- Learn how to get started with or without money,
- Explore Real-Life Strategies for Building Wealth,
- And a LOT more.
Sign up below to download the eBook for FREE today!
We hate spam just as much as you
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing