Portfolio of 9 condominiums vs. single multi-family property
Member since 2025 · 31 posts · 21 votes
Portfolio of 9 condominiums vs. single multi-family property
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Lender · Marlboro, NJ · Member since 2025 · 243 posts · 150 votes
8moI’ve seen both structures work, but they are very different risk profiles even if the unit count is similar.
With 9 condos, you're not just underwriting the units, you're underwriting the HOA. $240 per door is manageable if reserves are strong and there's no deferred maintenance, but one special assessment can wipe out your "$25k under market" advantage quickly. I'd want to see reserve studies, delinquency rates, upcoming capital projects, and the board's history before getting comfortable.
The flexibility to sell units individually is real. That optionality has value. But keep in mind that liquidity works both ways. Retail buyers disappear in tougher markets.
A single 9-unit building gives you more control. Value is driven by NOI, not retail comps. You can push rents, manage expenses, and force appreciation without relying on an HOA. The tradeoff is lumpy capex and no ability to sell one unit to rebalance.
For a 1031, I’d ask:
- What’s your goal: control and long-term cash flow, or exit flexibility?
- How sensitive is each option to rising expenses?
- If rents drop 10% and expenses rise 10%, which one still performs?
If the condo package truly trades at a real discount and the HOA is clean, it can work. If not, I'd lean toward the single multifamily for control and scalability.
9 Replies
- Honolulu, HI · Member since 2008 · 3k+ posts · 2k+ votes8mo
If you do not have a very thorough understanding of how Condo/HOA properties work, you should not consider them. They are typically, in theory, run by a Board of Directors made up of individual unit Owners. Owners that often know little about facilities maintenance, finances, or the multitude of Federal, State, Local, and Condo/HOA project rules that apply.
If you do nut fully understand the ramifications of what you see on the Annual Operating Budget, and the Reserves Funding Plan, you should not consider them. A significant percentage of Condo/HOA associations become underfunded as the years pass, due to Board Members insisting on keeping monthly fees low. To do so, they defer maintenance items, even though by law, and based on the Governing Documents of most projects, the Board's Number One Job is to maintain, protect, and preserve ALL common elements of the project. That is their purpose for existing. Yet so many fail, which results in "unexpected" Special Assessments, and large monthly fee increases.
In short, you have no control over what the monthly maintenance fee, or any other charges they might lawfully impose will be, and therefore cannot forecast beyond the fiscal year of the project.
And of course, you, and your Tenants, are subject to the Condo/HOA rules and their enforcement (or lack of) and interpretation of those rules.
It requires participation by the General Membership (other Owners) at Board and Budget meetings, and "keeping an eye on" the Board's actions and expenditures to ensure they follow their own By-Laws as well in their capacity as a fiduciary to ALL of the Owners. Unfortunately, many Board Members have their own agenda they push through with a weak Board and apathetic membership.
Having been a Managing Agent for a number of projects for over 10 years, I've SEEN things!
- 8moFrank PyleBusiness MemberSpecialist · USA · Member since 2024 · 280 posts · 130 votes
If the numbers are close I lean single multifamily unless the condo discount is real and you have a clear exit plan. On nine condos at 240 a month HOA you are at 2160 a month or about 26k a year before you even touch taxes insurance and maintenance, so that fee alone needs to be baked into your DSCR and compared to what repairs and reserves would look like on one roof and one structure. We looked at a six unit condo package recently that did not cash flow at the ask, but breaking them up and selling individually created margin because the per unit retail value was stronger than the bulk price, so the strategy matters more than the asset type. The big gotchas are HOA financial health rental restrictions and special assessments that can wipe out a year of cash flow overnight.
Are you planning to hold long term for income or would you realistically sell off units over time? If you want to share price rent and taxes I can sanity check the numbers and help you think through the exit strategy.
- Lender · Marlboro, NJ · Member since 2025 · 243 posts · 150 votes8mo
I’ve seen both structures work, but they are very different risk profiles even if the unit count is similar.
With 9 condos, you're not just underwriting the units, you're underwriting the HOA. $240 per door is manageable if reserves are strong and there's no deferred maintenance, but one special assessment can wipe out your "$25k under market" advantage quickly. I'd want to see reserve studies, delinquency rates, upcoming capital projects, and the board's history before getting comfortable.
The flexibility to sell units individually is real. That optionality has value. But keep in mind that liquidity works both ways. Retail buyers disappear in tougher markets.
A single 9-unit building gives you more control. Value is driven by NOI, not retail comps. You can push rents, manage expenses, and force appreciation without relying on an HOA. The tradeoff is lumpy capex and no ability to sell one unit to rebalance.
For a 1031, I’d ask:
- What’s your goal: control and long-term cash flow, or exit flexibility?
- How sensitive is each option to rising expenses?
- If rents drop 10% and expenses rise 10%, which one still performs?
If the condo package truly trades at a real discount and the HOA is clean, it can work. If not, I'd lean toward the single multifamily for control and scalability.
- Honolulu, HI · Member since 2008 · 3k+ posts · 2k+ votes8mo
Quote from @Pierre Guirguis:
The flexibility to sell units individually is real. That optionality has value. But keep in mind that liquidity works both ways. Retail buyers disappear in tougher markets.
A single 9-unit building gives you more control. Value is driven by NOI, not retail comps. You can push rents, manage expenses, and force appreciation without relying on an HOA. The tradeoff is lumpy capex and no ability to sell one unit to rebalance.
There is, in some markets, also the option, with a multi-family, fee simple building to convert it to a Condominium project. Obviously this takes a specialized Attorney, but depending on the building, this can be fairly straightforward. I've seen 10 and 12 unit walkups convert for less than $50K, or less than $5K per unit.
1) I’d want at least 20% off for buying 9, maybe more…
2) Can you afford to hang on to them long enough to sell if the HOA decides they can no longer be rentals? How much will that sale cost you and how much will you have to discount them?
3) Can you afford a student “special assessment” of $5-10-$20k per property?
I’d start by asking my realtor how much I could get if I had to sell each one within 30 days. Subtract 10% for selling costs, and that’s my very max bid. While aiming for another 10% off that price.
Will this wreck your financial future if the HOA turns against you? If so, pass.
- 8moEric FernwoodBusiness MemberRealtor · Las Vegas, NV · Member since 2014 · 1k+ posts · 1k+ votes
Hello @Mark Soreco,
You may be putting the cart before the horse.
You seem focused on property type. But no property in the history of the world has ever paid rent. The tenant pays the rent. Your financial success depends on having what I call reliable tenants in the property at all times, not a certain property type.
A reliable tenant:
- Stays for many years
- Pays rent on schedule
- Takes care of the property
Reliable tenants are the exception, not the norm. However, certain tenant segments have a high concentration of them. Buy properties that attract reliable tenants. Does this tenant-centric focus work? Yes. Using this method we have delivered over 600 investment properties. Our average tenant stays more than five years. In 17+ years, out of more than 1,000 tenants, we have had only seven evictions. Our vacancy rate remains below 2%. During the 2008 financial crisis, our clients experienced zero rent reductions and no vacancies—even though Las Vegas property prices fell 40% or more.
The process we followed:
- We interviewed property managers and analyzed tenant behavior patterns.
- We identified a specific tenant segment that stays many years, pays on time, and maintains the property.
- We determined what and where those tenants were renting.
- Our clients then purchased similar properties.
In my view, the real question is not condos versus multifamily. The question should be: Which tenant segment has the behavioral characteristics required to produce reliable income?
Summary
Identify the tenant first. Then buy what they're willing and able to rent. It might be condos, single-family homes, multifamily properties, or high-rises. Let your income goal drive property selection.
FERNWOOD Team, KW VIP Realty520 Reviews - Investor · Pacific Northwest · Member since 2026 · 538 posts · 314 votes8mo
The way I usually frame this decision is that you’re really comparing two different financial structures, not just two property types.
With the condo package you’re effectively buying nine separate exit options. That flexibility has real value. If the seller’s claim of ~$25k below retail per unit is even partially true, the discount could represent embedded optionality — you could hold for cash flow or sell units individually if the market supports it.
But the trade-off is that a large portion of the operating risk moves outside your control and into the HOA. You’re underwriting not just the units but the governance and financial discipline of the association. One weak board or deferred maintenance cycle can change your expense structure overnight.
A single multifamily flips that dynamic. You lose the ability to sell units individually, but you gain control over the variables that actually drive long-term value: rents, expenses, and capital improvements. The value becomes tied to NOI instead of retail comps.
For a 1031 specifically, I’d probably ask a slightly different question:
If capital markets tighten or transaction volume slows for a few years, which structure would you rather be holding?
Condos give you exit flexibility but introduce governance risk.
Multifamily removes the governance risk but concentrates the asset.
Neither is inherently better — it really depends on whether you value control over operations or optionality on exit more in your portfolio.
Out of curiosity, are the condos all in the same HOA or spread across multiple associations?
- 8moDave FosterBusiness MemberQualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
@Mark Soreco, I agree with what others say about being super attentive. If you decide to go the condominium route, it reminds me of a Warren Buffett quote that basically said, "don't listen to someone who says put all your eggs in one basket. You might be better off putting all your eggs in one basket and watching it closely."
Your investment goals in a 1031 exchange are that you must purchase at least as much or more than what you sold for in order to defer all tax, so you must purchase all of the properties in the portfolio and not just a few of them to meet your reinvestment goals.
Either way, utilizing a 1031 exchange is a great way to take advantage of the tax and reinvest in other investment opportunities, but risk mitigation is the name of the game, so make sure the numbers make sense.
For me, the thought of inheriting 9 HOAs as my new masters makes me want to crawl into a fetal position and hope for a swift end to the world.
The 1031 Investor5140 Reviews- Member since 2025 · 31 posts · 21 votes8mo
LoL I think most of the condos are under a single HOA, but point taken!
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