1-4 Unit condo deal?

4 Replies

Hey Guy's, I need some experience on this one. I don't know much about owning and renting a condo, except that many owners don't like the hoa's.

Buy and Hold.

8 yr old condo unit, 1 of 10 total in complex. Bank owns 4 units. 3/3/1, 1600 sq ft.

85k purchase, $1150 rent, $3400 taxes, $250 hoa. Tenant would pay all utility's.

Garbage, snow, lawncare and outside maint by hoa.

Financing, 25% down, 30 am, 4.33% apr.

I come up with piti of $665. for 1 unit. I think that I would eventually move into this unit within 4-6 yrs, for a summer home.

Other than appliances, hvac and special assessments, what should My concerns be?

John

I am assuming that this is not a vacation rental but rented month to month or leased. As a condo you are only responsible for inside maintenance and replacement of anything that you provide.

You need to include a vacancy factor. Probably 5% will do. The last thing is management. I pay 10% of rent plus one month's rent tor new client. If the management manages several in the complex you may get cheaper.

I would shoot for a cap rate of 7.33 given your cost of money of 4.33%.

Hope this helps.

Bill

Hey Bill, Your assumption is correct, hoa docs read over 30 day rentals only.

If I use the 50% rule, on $1150 in rents, I end up with $575 to pay a $333 mortgage and a $250 hoa fee, = $583. and a cashflow of -$8. A vacancy or hvac put Me into the red easily.

However (I think) there is an appreciation factor here, with 2/2/1 non foreclosed comps around 125k-145k. This one is 3/3/1. In My area, 2007 left us with a condo glut that is just starting to ease up and they are beginning to sell again.

I'm also pretty sure that the 220k tax assessment and taxes could be lowered $800 to a $1000 a year after the 85k purchase price. I've been searching county records and have seen proactive condo owners with comparable results after purchase. This would not help cashflow until next year. But it would be attractive to a potential buyer.

I'd really hate to do something stupid/costly. Maybe this is more profitable as a flip?

John

Promotion
Sharestates
America's Private Lender
Receive Fix and Flip Funding Approval In As Little As 24 Hours!
Sharestates helps developers and brokers secure funding quickly with the most competitive terms.
Get Funded

You might be right about being able to flip it. I don't think it would sell as an investment but would sell to someone who wants to live there. Make sure your comps are correct. Also, be sure that the unit doesn't need a lot of fix up.

I never buy and hold for appreciation but count it as a bonus when it happens. I count cash flow.

Good luck.

Bill

Thank You Bill.

I got a look at the financials and it looks bad. No reserves with actual monthly expenses running around $2800 split between 10 units on an 8 yr old building. $1500-1800 of it going to gas and electric for the pool area.

Add the Agent telling Me to expect a hold time of 3-5 years, for the market to come back.

Sounds like to much exposure. Instead of all 4 units, I may just lowball 1 unit and get a feel of the banks position.

John