Real Estate Investor · Delray Beach, FL · Member since 2008 · 8 posts · 0 votes
My wife and I are considering a property that our agent brought us last week. The property is a 2/2 condo (upper floor) in east Delray Beach, FL. Nice area, amongst several other condo developments.
Seller is the former president of the condo HOA and is willing to finance; though financing specifics haven't been discussed. Our credit is in the neighborhood of 770, so he couldn't find a much better buyer to finance.
Whats more, the current tenant has been in the property 3 years and is ready to sign a new 3 year lease (owner has waited to sign the new lease, pending buyer's wishes with regards to tenants).
Here are the Numbers:
-Assessed Value: $145,000
-Annual Taxes: $3210
-Monthly HOA fees: $315
-Rent: $900
Seller is asking $90,000, with a 30 year amortization and a 5 year balloon on the financing. To get right side up in the property, we'd have to put down at least $40,000... Is that right??
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
17y
Putting in a big down payment doesn't make a bad deal a good one. You have $600 a month plus insurance in expenses. How much is that? Plus property management, maintenance, vacancy etc. Be nice to have some profit, too. This seems like a bad deal even if it was free. What's the upside?
Real Estate Investor · Delray Beach, FL · Member since 2008 · 8 posts · 0 votes
17y
Jon - thanks for the reply. I'm looking at this and common sense doesn't make the deal work for me either. The one upside is the tenant - keep in mind we haven't seen rent rolls yet.
So, given the above scenario, what would make this deal work, assuming HOA, Taxes and Insurance are fixed?
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
17y
The rule of thumb is that expenses will eat 50% of rent. Seems like yours will be much worse. I understand insurance is expensive there. Property management is typically 10%. With hoa and taxes seems like you're pushing $700. Then you have to make a payment. Even though the tenant has been there a while doesn't mean they won't leave tomorrow. Seriously as a rental this is an awful dream. I would not pay more than $20k. You really need more rent. .
These were speculative plays. The assumption was prices would continue to rise. Is there any market for these? Are there tons of them for sale and lots of foreclosures? Are there new jobs and population growth? I don't know that market but it sure seems like prices are more likely to fall than rise.
Real Estate Investor · Myrtle creek , OR · Member since 2008 · 343 posts · 13 votes
17y
Josh, run from this horrible deal, there's no way to make it work. I agree with Jon, the HOA fee's, high taxes, insurance and management fee's eat up any profits even if this property was free. Move on find a better deal. Jim