Poss. Red Flags: Buying a Condo Building - 3 Units in New Mexico

Buying & Selling Real Estate
4yFollow

Poss. Red Flags: Buying a Condo Building - 3 Units in New Mexico

Brandy Nightingale
New to Real Estate · CA · Member since 2021 · 1 post · 0 votes
Hi there! I'm really new here, and am just getting into REI. Grateful for all I'm learning here and hoping someone might point me in the right direction.

We've been looking for a tri-plex in NM order to house hack, put an offer on one and the offer was accepted (!!!). However, now that we are getting the title docs, etc. it appears the seller had the triplex converted to condos in 2005 (wasn't in the listing - red flag?). Two of the units share a utility/laundry room as well as utilities (we knew this initially, with plans to separate them). We also learned the driveway going from the street to the back of the building for parking is a "utility easement" and on google maps has an actual street name (have never seen this before). Needless to say, as a brand-spankin'-new investor having only purchased a single family home in the past, this all seems odd and rather scary.

Where I'm hoping for direction is:
-Pros and Cons of buying a condo building of 3 units (sellers have a "nonprofit association")
-Is a utility easement/street on the property normal or a red flag for future issues?
-Any websites/articles/videos/resources you know of an can point me to in regard to this situation, I'd be super grateful for.

Thank you!
0Reply
26 views

1 Reply

Jump to latestLatest
  • Robert Carmody
    Real Estate Broker · Albuquerque, NM · Member since 2019 · 59 posts · 93 votes
    4y

    Hi Brandy,

    Do you mind me asking where in NM the property is located? Condo conversions are more common in some areas of NM, while less so in others. Does each unit have its own property tax bill, and does each have its own legal description? Does your sales contract list each of the 3 units separately? Was the current owner the one that converted the property, and if not, were they aware that it had been converted? Is the zoning correct? A condo conversion should be disclosed, as it would be considered a material fact, with potential impact to the property value, taxes paid collectively with 3 different units compared to 1 multifamily property. In some cases, and depending on your long term plans with the property, the conversion can be a perk and gives you options that might make the future resale value higher and more profitable, if you resold the property as individual units compared to one investment property. It can also create some challenges because there are frequently financing limitations when purchasing units in a converted property. Condos, even those with only 2 or 3 units, usually require an HOA with rules, bylaws, and formal HOA documents that cover each owner's interest in the property, and insurance that works a little bit differently also.

    Most properties have utility easements running along at least one side of the property. They are usually about 5 to 10 feet wide, from side to side, or front to back of the property. Do you know if the property has underground utilities or overhead lines? Is the driveway paved or dirt/gravel? Utility easements give the utility provider the right to access their lines for the purposes of repairs or infrastructure improvements, and grants them the right to access their lines, even if they have to damage or remove part of your property to do so. Property owners, or tenants, should not add anything permanent to the property in the easement. Permanent would mean things like pouring concrete, building a swimming pool, building an addition to the property, installing a toolshed that sits on a concrete slab, pouring concrete driveways, etc. If the lines are underground and need to be accessed, the utility company and their contractors may move or remove whatever is an obstruction or preventing them from safely accessing the lines, and they are not responsible for returning that part of the property to the way that it was. It also means that they can do things like trim trees that are growing into overhead power lines. If the lines are above ground and you have a paved driveway that covers part of the utility easement, it's probably not something you'll need to be that concerned with, unless there are plans to bury those lines underground, which is not likely. If the lines are underground and a paved driveway covers the easement, know that there is always a possibility that you might have a problem if there was ever a need for the underground lines to be accessed. Underground power lines are typically pretty reliable and aren't at risk of having trees falling on them, or being damaged by strong winds, long term exposure to the elements, vehicle accidents, etc. You wouldn't want the house or condo units to be built into the utility easement, and you should be aware that it exists when planning your own improvements to the property in the future, but it's not that unusual to find "permanent" additions to the property or landscaping that are within the easement. 

    Did the driveway that has a street name used to be a shared alleyway with another property or properties? 

    Are you working directly with the owner, or do you both have agents? 

    Sorry to ask so many questions, but I can probably give you some more insight or point you in the right direction if there are other resources or professional opinion that might be beneficial. You are welcome to message me directly if you prefer.

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free