Owner financed condo with high HOA

10 Replies

I know condos are a hot topic around here. With the knowledge that there may be varying thoughts, I'd be interested to get a few opinions on a property I've got my eye on.

Positives: Low price, owner finance possibility, HOA includes gas, HVAC maintenance and replacement, water, trash, exterior maintenance, snow removal.

Negatives: High HOA.

Price: $50,000

Improvements: $0


Rent: $900


HOA: $323 (whoa!)

Vacancy (10%): $90

Property management (10%): $85

Maintenance (2.5%?): $23

PITI guestimate (with owner finance): $300

$900 - $323 - $43 - $85 - $23 = $426 left to cover PITI (expenses over 50%)

$426 - $300 PITI = $126 Cash flow

Does this really leave enough wiggle room? Particularly with high, unavoidable monthly holding costs of $623 (HOA dues and PITI). A lot of what ifs come to mind with that (what if the HOA decides to disallow rentals?)

I budget $83 per month maintenance on condos. I also assume the tenant will pay electricity when occupied?

Good luck.


Thanks for your thoughts, @Bill Jacobsen

Yes, the tenant pays electric.

Next to the positives and negatives, I should have put in a neutral up there: "Hard to determine maintenance when HVAC repair and replacement is covered by the HOA dues."

Does that effect the $83 you suggested? I'm also curious as to how you arrived at $83, specifically.

And what about the PM filling the unit? That's $675 off the bat, or $56.25 monthly over 12 months, assuming the tenant stays for at least the entirety of the lease.

Doesn't seem like a great deal, but the price and owner financing seemed so great, I just wanted to make sure that my numbers accurately ruled it out.

The cash flow on this deal isn't going to be great but the most important question is how is the $50k price compared to the comparable units? You need to have an exit strategy and if you have no equity in the property it'll be tough.

Hi @William Sumnicht

What is the existing financing? Type of mortg and balance of mortg and PITI payment, not HOA?

You can buy it Sub2 for a payment that works for you. Maybe the owner can contribute. If its free and clear offer $600 a month for (50K div by 600) months.

HOAs need to read the bylaws. Some prevent renting and owner financing.

Cash or terms, dont pay retail cash ever, especially with outrageous HOA.

I agree with Patrick. Have a good entry price so you have the flexibilty to exit. This is not a horrible deal. I have $30K condos that rent for $675 and have a $210 HOA.


I used to budget a % of rent for maintenance until I got it through my head that maintenance cost was not dependent on what I charged for rent. I started budgeting $1,000 per year for inside and $1,000 for outside for a single-family. That makes $1,000 for a condo. H-Vac is usually the responsibility of the owner so yes, you could deduct some in your case.


@Patrick L. @Frank Romine You're absolutely right. Didn't have comps accessible to me, directly. But if I would have felt more comfortable with the rest of the numbers, bugging my realtor friend to get that information would have been the immediate next course of action.

@Brian Gibbons Owner didn't seem desperate. But would be one heck of a deal if an owner contributed to the sub2. Assuming you've done that in the past, have you had any issues with original owners not following through on their contribution? The suggestion you made to pay $600/mo if free and clear - does that assume a negative cash flow, with the benefit of paying off quickly?

@Bill Jacobsen Great advice.

Don't forget property taxes and insurance.

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