Newbie condo purchase

6 Replies

Looking to put an offer in an a condo unit. I have never purchased a condo and looking for some BP advice!

Purchase price $138,000

4 bedroom 3 bath, completely redone ( granite counter, bamboo wood floors, SS appliances, new heat pump and hot water.

Tenant in place with monthly rent of $1,800

HOA monthly is $260

20% down- 27,600

Taxes- $1,500

Any advice would be greatly appreciated.

Thanks BP nation!

Using the 50% litmus test I don't know that I would do it. Using just rough math the mortgage on that property with your down payment will be around $659.00 + HOA = $919.00 a month. 1800 x 0.5= $900.00. So you would be at -$19.00 a month.

Is your goal with the property cashflow? If I were you I would want to know how long the current tenant has been in place and if there is an active lease or if they are month to month. Also make sure you check comps. You want to make sure it is reasonable to expect to get $1,800.00 a month from the next guy.

Just my $0.02

Ryan D. Thanks for the quick reply! Yes my goal on this property would be cash flow. The tenant has already been there for a year and currently wants to extend for another year. Comps in the area are comparable.

Do you have any experience with condo's and issue's that they create with HOA and other factors?


Thanks for the help,
Sean

Originally posted by @Ryan Dossey:
Using the 50% litmus test I don't know that I would do it. Using just rough math the mortgage on that property with your down payment will be around $659.00 + HOA = $919.00 a month. 1800 x 0.5= $900.00. So you would be at -$19.00 a month.

Is your goal with the property cashflow? If I were you I would want to know how long the current tenant has been in place and if there is an active lease or if they are month to month. Also make sure you check comps. You want to make sure it is reasonable to expect to get $1,800.00 a month from the next guy.

Just my $0.02

You're double counting expenses using BOTH the HOA and the 50% rule. Cash flow would be higher.

@Sean Delaney

HOA fees can really kill a deal. If they go up a substantial amount, you "solid deal" turns in to "miserable craphole" in 1 board meeting.

I wouldn't buy this place at 138, because it doesn't meet my minimum numbers ($150/month cash flow AND 15% CoC). I would buy it at $113,500.

Here are the numbers as I see them:

Mortgage Rate 5.00%

Length of Mortgage in years 30

Monthly Mortgage payment $592.65

Taxes $125.00

Sewer and Water $-

Trash $-

Heat/Utilities $-

HOA $260.00

Cap Ex and Ops $150.00

Insurance $100.00 (guess)

Mgmt Fee $180.00 (BP standard of 10%)

Vacancy $144.00

Total Expenses $1,551.65

Total Revenue $1,800.00

Cashflow/month $248.35

Cash on Cash Return 9.00%

Originally posted by @Aaron Montague :
@Sean Delaney

HOA fees can really kill a deal. If they go up a substantial amount, you "solid deal" turns in to "miserable craphole"

More double counting of expenses. HOA fees should cover most cap exp and may include taxes, etc. You DO want to know what expenses are covered. Substitute "expenses" in your statement above for HOA fees and you can kill ANY deal.

When buying a condo you want to check their reserve study to see if they are on solid financial ground and you want to check the last 3-6 meetings minutes to see if there are any "drama" issues and how the Board responds to them.

@Bob Bowling @Aaron Montague Being new to real estate investing I can't tell you how much appreciate the feedback and insights. Hopefully in a few years I'm a veteran investor like yourselves and providing other BP posters insights!

Thanks again!

Sean

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