I have a motivated seller on the line that wants me to send him a contract. He originally wanted 109,000 for the house, when it's probably worth about 140,000.
I told him I would be able to offer him 98,000 for the house minus any repairs that needed to be done.
After looking further in to the house, I found out that MONTHLY HOA/membership costs are about 3,000! On top of that, there's a refundable "equity membership fee" of 68,000 just for living in the area. This is refundable when you move out of the house. Additionally, there is a nonrefundable 7,000 "initiation fee" for moving in to the community as well.
Obviously I wouldn't be able to give this guy 98,000 for the place. I was thinking at best I could give him 25,000 for the place.
I was wondering if this is just a ridiculous deal based on these fees, and if I should just run? Do you think someone would pay like 30,000 cash to move in to the house, and I could make a 5,000 assignment fee? Or is this just too risky?
3000 monthly? I try to avoid any HOA over 100 monthly
Yes this is a golf community, so there yearly membership is 30 - 35k. Insane! Thanks for the comment.
Is this an assisted living type community where the dues cover all meals, activities, home maintenance etc? My grandmother lives in one of those over there in Vero and it's around that price but the golf is only a small part of it. It includes 2 meals a day at the club, lots of activities and all maintenance for the house. They take care of everything for her at that price, if a light bulb burns out they send someone to come fix it.
Are you using other comps within the exact same HOA to come up with your value? I know some of these type of arrangements have no value due to the fees and deposits so you're pretty much forced to sell it back to the HOA.
Sounds like the only entity able to make money on this is the HOA which is probably the same entity that built the community
I guess all these fees are a way to extort the elderly in a way that wouldn't be possible if it were just a rental
I see this often in golf communities. It's not the HOA that is $3000/mo., it's the golf membership. They do this because golf courses normally aren't self sustaining without a required membership. Look to comparable sales, as always. The golf situation is factored into recent sales. When you say it's probably worth $140k, based on what? Some pretty decent condos here sell for $10k because of a $40k required equity payment.
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing