My name is Alicia Holsey and I'm a brand new investor in the Philadelphia area. I am looking to mostly buy and hold with the occasional flip and I'm currently searching for my first deal. Before I get into the meat and potatoes of my post, I want to thank everyone here for their advice on all the forums, I've spent the greater deal of the last few months soaking up all that BP has to offer and it has been amazing!
I am currently performing my due diligence on a 3/1 condo that I found on an auction site in Norristown. I've visited the property and repairs are minimal, only including new appliances, fresh paint, and carpeting. I plan to use the BRRR strategy. Here are the numbers:
All in (Purchase Price + Repairs): $55k
Estimated Monthly Rent: $1450/month
HOA Fee: $225/month
Taxes: $2500 annually
Property Management: $145/month
Vacancy (5%): $75/month
Estimated Monthly Cashflow After Refi: $250/month
Cap Rate: 12%
The problem that I'm having with the property is that I am unable to speak directly with the property management company and HOA to confirm that the unit can be rented. I've left several messages and emails with the management company with no response. I've also tried getting in contact with the HOA directly, however the information I received is incorrect. Mysteriously, the auction house has somehow been able to get into contact with the HOA and property management company on several occasions and has confirmed that the unit can be rented. While I think this condo would be a great deal, I think it's strange that the listing agent is able to contact the HOA and property management company with no problem and I can't even get a simple call back. As a last resort, I asked the auction house for a copy of the HOA bylaws and she told me that there's a $275 fee for a copy which I think is a bit ridiculous.
I'm concerned that if I go forward in purchasing the property, it would be difficult to reach management to get things done that are covered by the HOA fee or worse not be able to rent the unit on day 1.
Would you trust the auction house and move forward in this deal or would you run as far away as you can?
Thanks for your advice and sorry for the long post.
I used to be an HOA board president for my condo association and from my experience can tell you do not believe anything that agents or auction tells you. Talk to neighbors and find out contacts for board members and talk to them. But you have to have the association bylaws and all amendments that will retell you in detail how the association operates and if you can rent out the unit. Also they may have additional charges for the rental units or some additional fees. You should ask about capital contribution fee that you will have to pay when you buy the unit. It may be anywhere from 1 to 12 months of condo fee.
$275 is more than reasonable fee for the package of documents that you have to review before purchasing and it's standard practice. Some HOA charge more than that.
Also you should be able just to go to the office of management company and talk to them directly.
Thanks @Yuriy Skripnichenko . This is helpful. I guess I will go ahead and order the copy of the bylaws. The number I received for the HOA and management company were from the residents. I can only imagine the headache they get when something needs to be done in the community. I will try to stop by the property management's office directly and perhaps get information that way. Thanks for your help.
@Yuriy Skripnichenko Went to the address listed at the property and on the website for the property management company and guess what - they aren't there! There is another property management company there and they noted that a lot of ppl go to their office looking for the office of the property manager listed at the condo. I guess they aren't only ducking me ha!
I think the writings on the wall with this deal. Way too many red flags.
There is a lot of issuea that you can face owning a condo. That's the reason why i had to step up and be board president for a while to put association on track. If you decide to go for it, make sure to review co do financials as well. Tge association can be in debt or not collect enough of fees to stay current with maintenance. Also make sure that you will not end up with delinquent unit that you will have to pay all back fees for
Welcome to Biggerpockets @Alicia H. ! I agree with @Yuriy Skripnichenko , absolutely confirm the information regarding the HOA and PM company prior to locking yourself into the purchase. It's too easy for people to pass misinformation around so I always try to go directly to the main source of the info for confirmation.
I wouldn't necessarily "run away as far as you can" but absolutely do as much due diligence as possible. You'll thank yourself later. Let me know if there's anything I can help with regarding comps or neighborhood info.
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