Help Analyzing a Deal

4 Replies

Hey everyone,

So I see a deal with the following stats:

189,500 for a 3br 1.5ba condo with a 1 car garage.

HOA: 280/mo

Taxes:370/mo

Rent:1900-2000

This is a turnkey property, so minimum, if any, remodeling or updates needed.

What's your take on the deal? 

Good morning,

I personally do not like condos for several reasons. But that's not the question your asking. I think it really depends on a couple things. What does the HOA cover for those monthly fees? Exterior, roof, landscaping and maintenance, etc. Once you know those answers, it will give you a better idea if its a good deal or not. Some HOA's cover almost nothing and others cover everything to do with exterior maintenance, plumbing and electrical (in the walls only). Some HOA's are poorly run and mismanage funds so they cannot afford to take care of the property as it should be. IF they take care of all the above, you wont have to budget that money every month for exterior CAPEX or maint. Ask for a current copy of CC&Rs' and the budget too see what they cover and what they have planned and budgeted. Some times, they will force a special assessment, can be several 1000's of dollars per unit if they are short in reserves, for necessary CAPEX or repairs. A lot can be told from just looking around the complex. How does it look? Is it well maintained? Paint and roof in good shape? Is it clean, swept, dumpster area in good shape? No weeds and trees are trimmed etc.

I prefer multifamily now over a single units but have owned many SFR's. The more doors, the more cashflow and I wont have to deal with tenants because the income allows for a property manager. I don't know where that property is located or if this is your first deal or not, but I'm not too thrilled about the deal because 1 or 2 months empty or a water heater or a/c goes out and your running negative.

I hope that at least gives you things to think about before you decide.

@Alex Sazonov - Really depends on the appreciation potential and class of the property. What's the historic appreciation of similar condos over the last 3 years? Is this in an A, B, C, or D area?

This is a pretty skinny deal, cashflow-wise (and you'll have higher turnover since its a condo), but if it's rapidly appreciating in a great area it might make sense.

Thanks for the reply, folks. The condo association is very good. All roofs are being replaced as we speak, they cover exterior, landscaping, water, garbage pick-up, etc. It's also in one of the best school districts in US.

Appreciation potential is hard to tell given that I think home prices overall are overvalued by 10-20% nationwide. Cashflow from the property hangs around $450.

I get that if it's empty for a few months, we may be running negative. The heater, a/c, and washer/dryer are all newer (replaced in last 5 years).

This is in Northwest Chicago suburbs.