Your thoughts on this foreclosed condo which has no HOA

12 Replies

Hello Everyone,

I am new to the world of real estate investing and would like to hear from experts on this condo opportunity in a 3 unit building I have in front of me. Here are the facts as I know them:

LP: 130K

Taxes: 4K / year

HOA: 0

Potential Rental Income after fix-up: 2K / month

Since the property has been foreclosed, it has:

1. no working heat. It has a separate heating unit in basement, which appeared to be off and very old.
2. no electricity. Probably cut-off by PSEG for non payment of bill
3. no appliances
4. Building has no condo association and therefore no insurance and HOA dues.
5. leak stains on the roof. No active leaking. Since no HOA, I will be responsive for the roof as this unit is on the top floor.

My main concern is that the building has no HOA and no insurance. How does that affect me as an investor and what steps should I take while approaching this opportunity.

Regards
Sandeep

The original owner, who converted to condominiums, never established the HOA. At least this is what I have learned from the Real estate agent.

Who maintains the common areas?

I would Not touch this.  I've seen with 4plex "conversions". No, or a defunct, COA is a disaster.  There is no method for separating yourself from the issues/problems with the other two units.

Originally posted by @Wayne Brooks :

I would Not touch this.  I've seen with 4plex "conversions". No, or a defunct, COA is a disaster.  There is no method for separating yourself from the issues/problems with the other two units.

I agree. Didn't know you could have condos without an HOA. How does that work?

the common area is the: entrance door, stairs and roof.

No one is maintaining them. They are in bad shape.

Originally posted by @Wayne Brooks :

I would Not touch this.  I've seen with 4plex "conversions". No, or a defunct, COA is a disaster.  There is no method for separating yourself from the issues/problems with the other two units.

 What do you mean by COA?

Does the high ROI because of the high rent and no condo dues offset for additional issues? Your thoughts?

Originally posted by @Neil Aggarwal :

Who maintains the common areas?

My understanding from the real estate agent is that the person to whom it affects it the most ends up doing it.

So since this unit is on the top flower, it's owner will end up doing all the roof work.

But there is not much of other common area besides the stairs and main entrance.

@Sandeep Arneja Tou said they were condominiums. So, you would have. Condomininium Owners Assocaition (COA), not a Home (HOA). The form of ownership is different, and so would be the Association entity. "No dues" is not a gift. Dues exist because there has to be building insurance(which you can Not buy for just your unit, since you don't own the building), building/common area maintenance, etc. enter at your own risk. Talk to a local RE attorney about the consequences, not an agent trying to sell it to you, then let us know what they say.

Sounds like a recipe for disaster. I doubt you would be able to get a loan for this or any type of insurance. If something catastrophic happened to the building itself or common areas you would be SOL with your unit.

Someone would need to purchase the whole property and complete the condo process so that there is money collected by all the units to maintain the building and common areas for this to really be viable in my opinion. No matter how nice your unit is if the rest of the building is vacant or neglected they will become your problem.

Originally posted by @Sandeep Arneja :

the common area is the: entrance door, stairs and roof.

No one is maintaining them. They are in bad shape.

That is the problem.  If nobody is in charge, nothing will be done to fix them.

More examples of problems: Who maintains the grounds? Who does the lawn mowing? What if the foundation needs to be fixed?

This is going to be a disaster to get into.

I would like to thank all of you, for taking the time out and advising me here. 

It has become abundantly clear to me that purchasing a condo without a COA is opening myself up to a lot of risk. I ended up not purchasing the condo and am back on my search for investment opportunities :)

Thanks
Sandeep

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