Purchasing Condos

Buying & Selling Real Estate
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Purchasing Condos

Paul MunleyPro Member
Part-time Real Estate Agent And Full Time Business Owner · Gilbert, AZ · Member since 2015 · 16 posts · 3 votes

Is there anyone specifically who can say they own multiple condos and are successful in this? It seems that their is a lot of red tape involving the condo associations that can cause issues in cash flow. I'm just curious if their is anyone that is completely successful in this strategy to see if it's feasible. 

Thank you!

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Chris SeveneyBusiness Member
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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
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Ask for the financials. Ask how many or what percentage of owners are delinquent on there fees. Ask if rentals are allowed. Ask for the meeting minutes. Ask what yearly Fees have been the past five years. Ask if there are any current or planned special assessments.
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  • Jeff B.
    Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
    10y

    Your're right; the condo assoc is just like hoa; pain in the butt.  Look for a level playing field instead of attempting Mt. Everest (ie go elsewhere imo).

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  • Russell BrazilBusiness Member
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    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    10y

    @Paul Munley Three of my properties are condos, and those also happen to be my three easiest properties manage, and the three properties that give me the best cash on cash return in my portfolio.  Ive never had a problem with the condo association in any of my properties.

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  • Paul MunleyPro Member
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    Part-time Real Estate Agent And Full Time Business Owner · Gilbert, AZ · Member since 2015 · 16 posts · 3 votes
    10y

    @Russell Brazil Were there any precautions that you had to take when planning to buy these condos? For example, were there any specific questions you had when talking to the condo associations to reduce your chances of these issues occurring. 

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  • Anna Snyder
    Cleveland, OH · Member since 2015 · 18 posts · 3 votes
    10y

    HOA might not give you the entire picture. I would walk around & ask the unit owners. I would also google the name of the condo complex. I am aware of one condo complex in Ohio where I would recommend staying away from.

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  • Account Closed
    Professional · Cleveland, OH · Member since 2015 · 60 posts · 31 votes
    10y

    ask about their reserves and review their minutes.

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  • Chris SeveneyBusiness Member
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    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    10y
    Ask for the financials. Ask how many or what percentage of owners are delinquent on there fees. Ask if rentals are allowed. Ask for the meeting minutes. Ask what yearly Fees have been the past five years. Ask if there are any current or planned special assessments.
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  • Jeffrey Moffie
    Wholesaler · Cleveland, OH · Member since 2015 · 9 posts · 2 votes
    10y

    All we do is condo purchasing and reselling. As with anything else due diligence is the key. However you have to know what questions to ask and where to go to get the answers.

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  • Account Closed
    Investor / Real Estate Agent · Miami, FL · Member since 2015 · 81 posts · 55 votes
    10y

    All of my rentals are condos. While there can be some difficulty dealing with associations, I feel the advantages far outweigh the disadvantages as long as you do proper due diligence before buying. Most importantly make sure the reserves are where they should be. This  greatly reduces the chance of a special assessment. Also, find out the remaining life expectancy of the bigger ticket items like the roof, elevators, etc. that may bring a special assessment should the reserves fall short.

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  • Paul MunleyPro Member
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    Part-time Real Estate Agent And Full Time Business Owner · Gilbert, AZ · Member since 2015 · 16 posts · 3 votes
    10y

    Are these associations open to giving out all of this information? I mean I guess if they weren't open to doing so then you just wouldn't purchase the condo, but are they usually open about that information? 

    @Chris Seveney

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  • Paul MunleyPro Member
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    Part-time Real Estate Agent And Full Time Business Owner · Gilbert, AZ · Member since 2015 · 16 posts · 3 votes
    10y

    And just to clarify you mean reserves as in the amount they have for repairs in case something was to happen like the roofing needing a change? And by minutes you mean the amount of time the condo association meets to have meetings? @Account Closed

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  • Chris SeveneyBusiness Member
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    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    10y

    @Paul Munley

    You typically do not get the info until after its under agreement. Just make sure it's a condition as part of the sale similar to an inspection

    If you are financing it the banks will need this information anyways as they will not lend without this information. The hard part is trying to figure out who the contact person is who will get this for you and for me I out that on my agent

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  • Paul MunleyPro Member
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    Part-time Real Estate Agent And Full Time Business Owner · Gilbert, AZ · Member since 2015 · 16 posts · 3 votes
    10y

    So it's just a matter of taking the time to make sure everything is in line at that you get to know everything that you need to before purchasing, which should be the same with any purchase of property.

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  • Paul MunleyPro Member
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    Part-time Real Estate Agent And Full Time Business Owner · Gilbert, AZ · Member since 2015 · 16 posts · 3 votes
    10y

    The banks won't usually lend if this information from the associations are sub par right? And once it's under an agreement can you still back out at anytime?

    @Chris Seveney

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  • Chris SeveneyBusiness Member
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    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    10y

    @Paul Munley

    I don't know specifics because I did not finance my condo but typically to get financing the banks will allow a certain percentage to be non-owner occupied and have the delinquency rate very low. 

    If you have these conditions as part of the deal yes you can back out at any time

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  • Paul MunleyPro Member
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    Part-time Real Estate Agent And Full Time Business Owner · Gilbert, AZ · Member since 2015 · 16 posts · 3 votes
    10y

    Ok that makes sense. Thank you very much for the information! @Chris Seveney It seems like investing in condos could be a good way to go if you don't have a lot of money starting off because they are cheaper (considering enough due diligence is done). It also seems that a lot of these associations take care of the exterior maintenance which makes things easier. 

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  • Chris SeveneyBusiness Member
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    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    10y

    note while they take care of the exterior maintenance, you're paying for it through your condo fees

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  • Account Closed
    Investor / Real Estate Agent · Miami, FL · Member since 2015 · 81 posts · 55 votes
    10y

    @Paul Munley,  Your purchase contract should have a condo addendum where you can request a copy of the condo docs and most recent building financials. In the FL FAR-BAR contract you have 3 days to cancel from the date you receive this information from the seller. This gives you time to review and ask questions should you have any.

    If you end up purchasing a condo I suggest you attend the very next board meeting and introduce yourself to everyone you can, most importantly board members. They make the day to day decisions and can be great ally's should you need something down the road. 

    After buying my first condo I ended up joining the board and it has been a great learning experience. You also tend to come across information that may help you buy your next property.

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  • Paul MunleyPro Member
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    Part-time Real Estate Agent And Full Time Business Owner · Gilbert, AZ · Member since 2015 · 16 posts · 3 votes
    10y

    @Chris Seveney Ya that is true. I guess it just depends on if these monthly fees would cost more/less then a property management company on a residential home. Now do tenants in a home ever offer to do or do their own exterior maintenance on their property? 

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  • Paul MunleyPro Member
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    Part-time Real Estate Agent And Full Time Business Owner · Gilbert, AZ · Member since 2015 · 16 posts · 3 votes
    10y

    I'll have to look up that information for those laws here in AZ.

    And ok thank you that's a very helpful tip. It seems like in order to become successful in this business you need to be friendly and network with others. I will deff remember this for the future if I end up buying a condo! 

    @Account Closed

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  • Orlando Roche
    Marysville, WA · Member since 2015 · 136 posts · 19 votes
    10y
    Originally posted by @Chris Seveney:

    Ask for the financials.
    Ask how many or what percentage of owners are delinquent on there fees.
    Ask if rentals are allowed.
    Ask for the meeting minutes.
    Ask what yearly Fees have been the past five years.
    Ask if there are any current or planned special assessments.

    good advise

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  • Russell BrazilBusiness Member
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    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    10y

    @Paul Munley The few things Im looking at that are most important to me is the renter ratio, foreclosure ratio, reserve funds, and HOA rules.

    HOA Rules: Obviously they have to allow renters

    Renter & Foreclosure Ratio: I dont want either of these numbers to even be close to the point where the condo poject loses its FHA certification. If they can not be purchased with FHA financing the price will instantly plummet. Although I dont mind buying after its lost its certification and prices have already plummeted.

    Reserve Funds: If the reserve funds look good, it is unlikely that there has been or will be a special assessment.  If they are running too low, then a special assessment may be on the horizon.

    But you know these are just part of the risks of owning condos. They come with the unique risk of the special assessment (When you need to replace a roof on a SFH, is that any different?), drop in value due to not being able to finance it, rising condo fees, the face that they may actually depreciate in real terms. As long as you understand the risks going in, I think they can be worthwhile investments. You are not going to get rich off appreciation from them (Unless they are in say a downtown area of a major city), but they provide nice solid cash flow with less management compared to other real estate assets.

    I also dont point all my eggs in one basket. I own 3 condos, but I also own SFH, MFH, Townhouse etc.

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  • David Faulkner
    Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes
    10y

    Condos can be good investments, if you own the whole darn condo complex and all every unit in it ... otherwise, I would stick to single family homes with no HOA. SFRs are not that expensive in your neck of the woods too. I'd house hack a few of those under your belt.

    0Reply
  • Cameron Berens
    Real Estate Agent · Florence, KY · Member since 2014 · 53 posts · 15 votes
    10y

    We have two condos and so far they have been great rentals. Like others have said just make sure you do your due diligence. I have kept in good communication with the property management company for the complex from the first phone call inquiring if they allow units to be rented. On the most recent one we bought the management company and neighbors told us they were happy to see us buy the unit because we fixed up the place, placed great tenants in there, follow all the HOA rules, and pay our dues on time.

    I think it really just comes down to knowing your market and making sure the numbers make sense. I know my market very well and knew these complexes would be ideal areas to get into.

    Also, I really liked the comment about FHA. For the units we currently have whenever we decide to sell it will mostly be to another investor or to first time home buyers so it is important that we buy in a complex that the buyer will be able to get financing.

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  • Account Closed
    Professional · Cleveland, OH · Member since 2015 · 60 posts · 31 votes
    10y
    Originally posted by @Paul Munley:

    And just to clarify you mean reserves as in the amount they have for repairs in case something was to happen like the roofing needing a change? And by minutes you mean the amount of time the condo association meets to have meetings? @Account Closed

    Yes, reserves is the amount of money the condo has for necessary work to the building. The higher the amount of the reserves the better. Higher reserves will typically show that the HOA is doing a good job with budgeting, etc.

    The minutes is the information that is recorded from the HOA board meetings. This will give you a flavor of what the issues have been in the association.

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  • Account Closed
    Investor · Logan, UT · Member since 2013 · 21 posts · 7 votes
    10y

    Get clear information about how repairs are handled and where lines are drawn.

    For example, fencing.... which fencing is HOA responsibility? What if a fence borders my unit AND the commons?

    Which utilities are included?

    Parking - is there enough to make it a good rental (3 bedroom with only 1 parking space sucks...)

    HOA smoking and pet policy.

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