My first deal - Is This Worth it?

Question

This is a Condo - everything is in monthly figures

Purchase Price: $209,000

Mortgage: 814 (4.85% IR)

Taxes: 341

Insurance: 33

HOA: 175

Vacancy: 95

Repairs: 190

Rents for: $1900

Any input would be greatly appreciate! Thanks!

Lauren Apicella · Answer

@Brianne Hall It was built in 2007. The HOA fees include Water, Parking, Common Insurance, Exterior Maintenance, Lawn Care, Scavenger, Snow Removal.

I'm in a multiple offer situation so I don't have time to grab the HOA docs to look into their budget, but will do all of that during Attorney Review - this way if there is a red flag I can back out.

The location is great - a suburb that was not hit as hard during the recession - walk to the train to get downtown - close to parks/elementary/junior high.

Since it is my first deal I want to make sure I'm not missing anything with the numbers (or getting emotional!) and also keeping in mind downfalls of HOA's.

Brianne H. · Answer

@Lauren Apicella what year is the condo? Good condo management in place? What do the HOA/Condo fees include? Have there been any special assessments in the past, or are there any red flags that could indicate a special assessment on the horizon? I've heard far too many horror stories of things going drastically wrong when a special assessment pops up. Everything from improperly installed windows needing to be redone ($30,000/unit, happened to a coworker), poor management that didn't budget for cap ex (slapped every unit with an extra $200/m condo fees for 2 years for exterior siding replacement - one place I looked at for flip potential), or unforeseen natural causes that insurance may not cover (flood that damaged the parking garage, $4000 for the smallest sq ft unit - a different coworker.) They seem to happen more often than you would think, so if you do decide to go for it, make very sure all the condo docs are in order and you have some reserves should something like that pop up.

Lauren Apicella · Answer

@Joseph Abad thanks so much for the input!

Yes, property is in good condition so no expenses in the beginning until something breaks :)

Joseph Abad · Answer

It looks like it's below the 50% rule.

Mortgage + Taxes + Insurance + HOA = $1363 fixed/expenses.

Other variable expenses are expected to be at $950/month according to the 50% rule but that's just a rule of thumb.

If the property is in great shape and you think the repairs will be very minimal it sounds like a pretty good deal. Condos are awesome since you only have to worry about the inside.

The other thing to look out for is whether or not they limit the amount of rentals in the complex.

Lauren Apicella · Answer

I will be managing myself. Since the HOA manages exterior of building including landscaping, I would say about $40/month Capex, perhaps a little less