Question about HOA/Condo Fees

13 Replies

All,

I love this site!

I'm considering buying my first unit, a small 2 BR condo that is occupied and will have positive cash-flow - including the HOA/Condo Fees.

My question is, what's the group's opinion regarding condos, condo fees, etc?  The fees essentially cover water, electricity, garbage, and structure from the studs out.

Thanks!

I think they are great. Alot of investors are picky about the HOA fees but most of the fees cover real costs you would endure on a sfr or MF.

I like condos for a bunch of reasons:

1. Easy to Find - Lots of available properties

2. Easy to buy - Easy financing

3. Easy to fix - No roofs, yards or what not to have to worry about, these are covered by the HOA

4. Easy to rent - Condos are usually in much better environs than a duplex or more units. Tenants like the better quality and amenites

5. Easy to rent - See above

6. Easy to Manage - See above

7. Easy to Sell - There are 10 times as many buyers for condos vs multifamily - Larger pool of Buyers means better exit strategy for you. 

Shall I go on....

Originally posted by @Jarrod Clavelle :

Wow! This helps me so much! Thanks! I'm going to look at 2 Friday. COC returns are 16 and 19%.

 Where are you located?

I find good deals on condos all the time

just make sure to review the condo financials and condo docs before buying. You want to make sure they have adequate reserves and have the funds available for any upcoming projects (roof, siding, decks, etc). If they're under reserving then they may need to raise the HOA over time. Also in the condo docs read the rules and regulations to make sure you can rent the unit out and understand your responsibility if tenants cause problems with other owners.

That being said condos are a great way to invest in real estate. They normally cashflow well, are easy to manage, and thus are more passive than most of the alternatives.

Make sure you understand the bylaws before investing in a property you intend to rent to someone else. It sounds like there is already a tenant in place so hopefully it's a moot point but the biggest thing I don't like about HOA's is the rules you have to follow.

I agree with both @Jonathan Bombaci and @Wendy Schultz above. You have to be careful with condos for the reasons stated above. Many condo associations are fraught with issues. Be sure to ask other condo owners how they feel about the association, the board members and their experience in dealing with them. Also find out if the condo association is approved for FHA financing, as many are not which can make it difficult to sell later if you ever choose to do so.

See here:  https://www.realtor.com/advice/buy/fha-approved-condos/

You definitely need to make sure to read all the condo docs and bylaws very carefully, and ensure that they have adequate reserves. If they do not, they can levy a special assessment for any major repairs or renovations at any time. This can equate to a substantial increase in the condo dues that could eat away any cash flow you have. Also look into the history of the condo dues... when was the last time they went up? Do they go up every year? If so, by how much?

Condos can be a good investment, but they can also be a nightmare if you don't do your due diligence very thoroughly. 

See the following links for further reading:

https://www.biggerpockets.com/blog/2012-11-15-why-condos-arent-good-real-estate-investments

https://www.biggerpockets.com/blog/are-condos-good-investments

https://www.mashvisor.com/blog/buying-a-condo-for-investment/

https://www.retirebeforedad.com/condo-as-a-rental-property-bad-idea/

https://www.landlordology.com/investing-in-condos/

Thanks very much Braden!

Originally posted by @Braden Smith :

I agree with both @Jonathan Bombaci and @Wendy Schultz above. You have to be careful with condos for the reasons stated above. Many condo associations are fraught with issues. Be sure to ask other condo owners how they feel about the association, the board members and their experience in dealing with them. Also find out if the condo association is approved for FHA financing, as many are not which can make it difficult to sell later if you ever choose to do so.

See here:  https://www.realtor.com/advice/buy/fha-approved-condos/

You definitely need to make sure to read all the condo docs and bylaws very carefully, and ensure that they have adequate reserves. If they do not, they can levy a special assessment for any major repairs or renovations at any time. This can equate to a substantial increase in the condo dues that could eat away any cash flow you have. Also look into the history of the condo dues... when was the last time they went up? Do they go up every year? If so, by how much?

Condos can be a good investment, but they can also be a nightmare if you don't do your due diligence very thoroughly. 

See the following links for further reading:

https://www.biggerpockets.com/blog/2012-11-15-why-condos-arent-good-real-estate-investments

https://www.biggerpockets.com/blog/are-condos-good-investments

https://www.mashvisor.com/blog/buying-a-condo-for-investment/

https://www.retirebeforedad.com/condo-as-a-rental-property-bad-idea/

https://www.landlordology.com/investing-in-condos/

 

@Jarrod Clavelle You also will want to get copies of the minutes from the last couple of condo association meetings. Oftentimes, there are issues discussed such as special assessments that would not have been caught without knowing what was discussed. Also, in my opinion, you want to stay away from smaller associations with less than 8-12 units and preferably more. You will want to stay away from 4 plex condo regimes and run from doubles that are condo conversions. You get one wackadoodle owner in a small regime and it can destroy your investment. 

Originally posted by @Greg Jeanfreau :

@Jarrod Clavelle You also will want to get copies of the minutes from the last couple of condo association meetings. Oftentimes, there are issues discussed such as special assessments that would not have been caught without knowing what was discussed. Also, in my opinion, you want to stay away from smaller associations with less than 8-12 units and preferably more. You will want to stay away from 4 plex condo regimes and run from doubles that are condo conversions. You get one wackadoodle owner in a small regime and it can destroy your investment. 

 Thanks Greg!  I'm reaching out now.

@Jarrod Clavelle HOA fees are fine as long as you're getting your money's worth. You want the property to be properly maintained. The key is making sure fees and what you're getting for them are reasonable, and to be mindful of any assessments that will arise in the future.