First property...condo with HOA fees???

Question

A lady who knows I am looking to buy my first rental property gave Me a call today saying that she is selling her 1 bedroom condo. The price it’s listed for is $89,000 and she said she would go down a few thousand since she wants to get rid of it quickly.  The condo is in good shape with wooden floors, basic fridge and washer and dryer in condo.  HOA fees are $235/month and taxes are $216/month.  I’d put about 10% down so mortgage at most would be $600/month for 15 year mortgage. About $450 for 30 year.

Total = $1,050 give or take.

Previous tenant paid $1,200.00 per month but rent was steady for passed three years so prolly can get maybe $100 more a month.

Would this be a good starter property to get my feet wet?  Would you advice 15 or 30 year mortgage?  One thing that makes me question purchasing is it’s been on the market a little while now and still hasn’t sold. She did have it for $95,000 and that’s why she lowered?  Is it because maybe no one wants this kind of rental property?  Is it overpriced??  Please help.

Thanks in advance.

Stephen J Davis · Answer

I think the problem is you are paying full price. That is not how you do it. I want at least 15% below market after purchase price, rehab and closing costs. Run your comps. I bet this is a full priced deal. Plus the net cash flow is too low after you add in vacancy and maintenance. Sorry, but I think you should walk based on that alone.

Theresa Harris · Answer

I have a couple of condos, but you need to be careful and make sure they are well run and have good reserves.  What have other comparable units in the complex sold for?  I agree that taxes seem high.  As for the mortgage, always get the longest term possible. You can always make extra payments and pay it down faster.

Nathan Gesner · Answer

Anybody that tells you it's a bad/good deal is a fool because we don't know enough about you or your market.

What are other condos selling for? What are other properties selling for? Could you handle it if the HOA decides to bump the HOA fees next year or hit you with a $3,000 special assessment to pave the parking lot and replace the roof?

Personally, I think condos aren't as easy as people think because you have a lot of neighbors and a board to deal with. A good HOA can protect your property and value; a bad one can destroy your enthusiasm for life and faith in humanity.

Greg M. · Answer

How are taxes $216 a month? That works out to about 3%. That's insanely out of line for most of the US.

Some questions that you need to answer before pulling the trigger:

• Why do you think that rent can be $100 higher than it was? What is the actual going rate in the area?
• What is the rental market like in the area? Dying area or up and coming?
• Any HOA assessments in the near future? 
• Do they allow rentals? Just because it was rented doesn't mean they will allow them.
• What are the HOA's financials like? 
• What makes you think you can get an investment property with only 10% down? And what interest rate were you using?
• Have you accounted for insurance, capital expenditures, and vacancies in your numbers?
• Does the fridge and washer/dryer come with the unit or will you need to buy ones?

Account Closed · Answer

That seems a bit steep for an 89,000 condo.

Paul Kennedy · Answer

@Tracey Geary thanks for all your help.  Yes she has another unit.

Tracey G. · Answer

@Paul Kennedy

I'd say she's asking too much based on the info I found in the links below. They just bought it in 2018 for $60k. If it's not updated, I'd guess they are looking to flip for a profit. Also, in a total coincidence, I think my agent showed me a unit in this building a couple years ago. Definitely not Class A, thin walls, but it looks well-kept on the outside. You can see in the first link that just over half are rentals. The woman you are talking to owns another unit in the building - also purchased out of foreclosure. Maybe there's a two-for deal there and/or why is she selling this particular one? Some towns in Monmouth reassess to market every year - I don't know if Keansburg is one of them. If they are, they are assessing well below ask so that would be another indicator that it's overpriced (you'd have to research if they are one of those towns, if Keansburg is not, don't consider assessed value).

I also wonder why you think you can finance 90% on an investment property. Do you know if the HOA is warrantable? That will affect your ability to finance.

http://tax1.co.monmouth.nj.us/cgi-bin/inf.cgihttp://tax1.co.monmouth.nj.us/cgi-bin/m4.cgi?district=1323&l02=132300094____00049__09C0009M

Net net, I think it might have promise but you need to do more homework and bring the price down.

Paul Kennedy · Answer

@Tracey Geary Keansburg

213 Main Street unit 9

Tracey G. · Answer

@Paul Kennedy  Hi Paul, lifetime Monmouth County resident here. Do you mind sharing what town/complex and maybe I can weigh in? As a local, $216 a month in property tax is a sweet number. I only wish I paid that little.

Paul Kennedy · Answer

@Paul Kennedy

I should’ve been more specific. It’s in Monmouth county NJ. The building is full except for one unit.

I have to do more research on HOAs and taxes. And yeah it is market value which is really high now and that’s the reason it’s not selling lol. She seems like she isn’t budging much on lowering the price so I gotta just look for a better deal.

I am just too anxious to jump into something. Thanks for all your help.

First property...condo with HOA fees???

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