Real Estate Investor · Lawrenceville, GA · Member since 2013 · 31 posts · 1 vote
Hi BP,
I know for the most part that buying SFH and mutli family homes are better for long term investing strategies due to the appreciation and HOA/rental factors. However, granted you find a property with decent cash flow, very low HOA, and no current rental caps, would you take the plunge? Basically is it a rule of thumb to just steer away altogether from these and put the money towards SFH or should each property be examined on a case by case basis.
Investor · Atlanta, GA · Member since 2012 · 408 posts · 37 votes
13y
Danielle Prendergast, is that in Lawrenceville? You need to see if the HOA will allow you to rent it out to tenants or not. I think $20k is a no-brainer and you should add it to your portfolio. That being said, you'll have good luck reselling this in good condition back to the MLS for a profit. (If this is in Lawrenceville).
Real Estate Agent · Virginia Beach, VA · Member since 2012 · 2k+ posts · 1k+ votes
13y
With townhomes, just factor in the extra hassles, rising fees, HOA rules and violations if your tenants don't follow them (although this happens in SF too). The worst for me was when the immediate neighbor would make trouble, like they rented it out to 17 people or the kids started fires in the back yard or no HOA and their property was rotting away and painted purple, etc. Single family just gives a bit of distance so less neighbor hassles. I really dislike not having control over something that is physically attached to my house. I sold my townhouses except for one that's an end unit and was a great deal so I kept it, but I focus on single family now.
As for condos, they are scaring me more every day. I recently bought my first as we moved for work and didn't want anything expensive, figured live in it for a few years, then turn it into a rental when we move back home, but after several condo meetings, I have no faith that the condo board can be fiscally responsible. In the same breath they talk about adding to the reserves, they are asking the management team the likelihood of taking out loans to revamp the clubhouse, even though we're already iffy on the FHA renewal this year. Definitely don't like somebody else deciding on $50,000 deals that I'm partially responsible for (read future special assessment), so I don't think I'm a condo owner for long.
Rental Property Investor · Oxford, MI · Member since 2013 · 98 posts · 18 votes
13y
I'm looking at a few sets of condos in my area as they are very cheap and cash flow very well. A big factor is the HOA. I plan on reviewing their financials for the last few years prior to purchase. In addition not being FHA would be a huge problem for me.
Real Estate Agent · Virginia Beach, VA · Member since 2012 · 2k+ posts · 1k+ votes
13y
Adam Demchik, I believe FHA requires re-certification every 2 years now, so it's a real issue, and nobody talked about or disclosed the clubhouse work when I purchased a year ago, even though I asked if there were any large repairs or projects on the horizon, so I'm learning that a condo is only as good as its board, as they make a few stupid decisions and the whole complex suffers.
Rental Property Investor · Oxford, MI · Member since 2013 · 98 posts · 18 votes
13y
I was pretty gung ho about a couple of condo's as the Cash ROI was near 30% but after talking to a few others who own and rent them out, I decided to slow down and do some digging on the association.
Apopka, FL · Member since 2012 · 207 posts · 120 votes
13y
I actually like condos and townhouses (though I've never owned a TH). They tend to be cheaper per sq ft than houses and command more rent / acquisition $.
The big thing I look at in an HOA is financial stability. Don't get in a situation where they're not being aggressive about collecting past due payment. What % of the units are behind on HOA. Is that getting better or worse. What's the age of the average account in arrears? Those are the type of things that will bite you later.
Real Estate Investor · Lawrenceville, GA · Member since 2013 · 31 posts · 1 vote
13y
Ok so I'm guessing its best to save the hassle and pay more for the SFH. However, I am under contract for a top floor 1300sqft 2004 3bed/2 bath condo in a area id rate 6/10. not so bad that i wouldnt live there. im paying 20k cash to own it outright. It sold for 88 originally. No rental cap and rents anywhere from 7-850/ month. HOA fees r outrageous at 150/month. even with this..Cashflow 300+
Take it or leave it and put down on a home? I figure i cant go wrong since its so cheap and i own it. Exit strategy is hold for 1-2 years and flip it as i imagine it to go up in value as others are selling in the 30s.
Mechanicsburg, PA · Member since 2013 · 3k+ posts · 2k+ votes
13y
Danielle Prendergast
I have owned townhouses and condos and still own some.
1. you want to know what all the rules are before you buy. Some HOAs prohibit renting, pets, and maybe some other things you might want to do.
2. You should check out the monthly fee and ask if there have been recent "special assessment".
3. You should check out the the financial condition of the HOA. Do they have plenty of reserve funds for big ticket items like roofs, paving and operating budgets.
4. What percentage are owner occupants and renters.
5. And if you are renting out the unit, with your expenses including HOA fees, taxes, insurance, utilities, etc. what is your profit.
6. You mentioned "top floor". I have a 3 story TH for sale now that several people have let me know that the amount of steps is too much. Another investor I know has a 1 level condo for sale but it is on the 3rd floor in a beautiful building that does NOT have an elevator. He has reduced his price twice and still hasn't sold it. Word to the wise.
Accountant · Chanhassen, MN · Member since 2012 · 10 posts · 3 votes
13y
It depends on a variety of factors. I currently own and leasing out a 3-bedroom; 2-bath condo in a convenient location where all the key shopping areas are located within the same vicinity. It is also located near a major highway that can go to the heart of downtown. Location was a key factor into my investment.
You should also factor into association dues as I view them as fixed costs that can only rise. Pay attention to taxes, insurance, special assessments, etc. as they will eat away your profits.
Does the association allow pets? A lot of renters I've encountered have pets, so you'll limit your amount of potential tenants if pets are disallowed.
Meet your potential tenants and learn about them as much as you can. You want to rent out to responsible tenants. Also, read the bylaws to familiarize what you can/can't do, as well as learning the history of the association if you can.
At the end of the day, will you potentially cash flow enough? Are you happy with your cap rate, etc.? For condos, there are many risks as well as many rewards. If you can manage the risks effectively, it may be something worth investing into.
Investor · Atlanta, GA · Member since 2012 · 408 posts · 37 votes
13y
Danielle Prendergast, is that in Lawrenceville? You need to see if the HOA will allow you to rent it out to tenants or not. I think $20k is a no-brainer and you should add it to your portfolio. That being said, you'll have good luck reselling this in good condition back to the MLS for a profit. (If this is in Lawrenceville).
Real Estate Investor · Saint Petersburg, FL · Member since 2013 · 1k+ posts · 951 votes
13y
Originally posted by Danielle Prendergast:
Ok so I'm guessing its best to save the hassle and pay more for the SFH. However, I am under contract for a top floor 1300sqft 2004 3bed/2 bath condo in a area id rate 6/10. not so bad that i wouldnt live there. im paying 20k cash to own it outright. It sold for 88 originally. No rental cap and rents anywhere from 7-850/ month. HOA fees r outrageous at 150/month. even with this..Cashflow 300+
Take it or leave it and put down on a home? I figure i cant go wrong since its so cheap and i own it. Exit strategy is hold for 1-2 years and flip it as i imagine it to go up in value as others are selling in the 30s.
What are your suggestions?
I like how there $150 is outrageous for COA fees. The reason I don't buy condos here is the cheapest fees start at $300/month and many are $500-600 a month. Insurance in FL is expensive but I can insure a 1,000 sqft single family home on my commercial policy for $500/yr.