Th average SFR distressed in San Diego can be quite high (often more than $500k which also often means higher returns post rehab) but condos / town-homes are not as expensive ($150k-$250k) and as such, are more attractive for someone relatively new to the game AND using a HML versus all cash. What advice can you give in flipping a condo vs a single family residence? Pros and Cons? I see an HOA as a major Con possibly prolonging the process digging into profitability. Anything else to look out for?
Even most townhomes and condos in San Diego are more than $250K. Besides the HOA, you also have to make sure that the condo community isn't too heavily concentrated with investor-owners (40%, I think), or you won't be able to obtain Fannie Mae financing. It's really tough to find any cash flow in SD.
We're doing a condo flip at the moment in Oceanside (3b+1.5b). Got it for 250k (July 2016) and putting in about 15k. The HOA is killer though - $330 per month. Its an older community so pretty sure it's like life insurance for a place about to kick it.
Pros: affordable compared to SFRs we looked at. (Might not make the best investment return, but we needed a place to live)
Cons: dealing with the HOA in regard to their responsibilities (common areas). Our side needs to be tented and now trying to convince sharded wall neighbor to go through with it also. Most exterior alterations have had to go through HOA approval as well (ext. light, patio cover, new windows and doors, dryer vent cutout)
Our first two flips were SFR in Sacramento. Less of a headache overall.
HOA is the obvious hurdle. The HOA may have a lot of baggage (lawsuits, unfavorable rules for owners, etc) that could make it challenging to sell to prospective buyers.
Using a first-hand example, I lived in a condo in Chicago for many years (I rented). Shortly after moving in, I learned that they had a pet policy that required the pet to be less than 50lbs. If at any point management suspects your pet is over 50 lbs, they reserve the right to have you go get it weighed. They also reserve the right to force you to get rid of the pet if it weighs-in at over 50 lbs.
As a huge animal lover, no way would I ever consider buying a condo in a place with rules like that.
I actually prefer condo/townhome flips. I have done 5 recently see below:
#1 - bought for $51k and sold for $119k. Net profit was $35k
#2 - bought for $50k sold for $109k. Net profit $22k
#3 - bought for $58k sold for $97k. Net profit $17k
#4 - bought for $95k sold for $172k. Net profit $23k
#5 - bought for $156k sold for $207k. Net profit $28k.
I happen to love condos/townhomes because I am not responsible for exterior items such as roof, siding, landscaping, etc. they also require very minimal investments and minimal risk exposure. I have only been doing flips for about a year and am profitable, but not sure if the above numbers are considered great in this field. None of the above properties took longer than 4 months from purchase to resale.
@Mayer M. - I really wish there were such a thing as a $50k condo in San Diego :) but as @Tim Smallwood also points out $250k is hard to find so the margins are so different - it is what it is though. @Brian Reiner & you brought up points I had not though of as well. I like not having to worry about fixing a roof but at the same time, gaining approval for a dryer vent cutout thru the exterior wall would be a pain if the HOA didn't approve it.
@Mayer M. Are all of these townhome/condo flips in New Jersey?
Maria, yes they are
@Mayer M. where in NJ if you don't mind the competition ? ;)
All throughout south Jersey. Camden, Pennsauken, etc. wherever I can find them
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