My Fiance & I are starting our investment career in Medford Oregon. We both live close by. She is currently searching for a condo for our first investment property? Just want some deep insight on pros & cons on condos & HOA fees? I have done some Extensive research & sudden thinking it may not be for us? Any thoughts or tips plz & thank you🙏
Hey there Jesse,
Let me give you my angle. Many new investors see this as an easy way to get into the game. It's pretty passive and the HOA handles some issues that make it easy on the investors. With that said in most cases cash flow and expenses at best balance out due to the HOA fees as you pointed out(At least in my market they do).
Honestly it may even be more advantageous to get a SFR/MFR and get a property manager. Run some numbers on a condo and on an SFR and if one comes back with that sweet sweet green CoC ROI then run from there.
Feel free to PM me I'm happy to bounce ideas!
75% of my properties have HOA fees. Most people on here will rail against HOA's and how they take away your freedom and how they might impose special assessments etc. etc. I've never had a problem. Then again, I read every newsletter, attend some HOA meetings and try my best to show the board members that I am trying my best to keep tenants who don't understand (or care about) HOA rules in line.
For my next property, even though I would like to avoid an HOA, in expensive markets a condo/townhome might be all I can get approved for. As long as you do your research on the HOA (study the CCR's, make sure they allow rentals, make sure they aren't in financial trouble, etc.), there's no reason to let SFR and multifamily owners scare you away from from condos.
Jesse: It is very market dependent and also somewhat dependent on your personal situation. In my market in Southern California, condos and duplexes worked very well but I could not get the SFRs to pencil. The condos all had recreation facilities and pools.
The condos and 2-plex worked for me for the following reasons:
1. I had a full time job and the HOA reduced the things that could go wrong and reduced the list of things that I was responsible for. I find that they are generally more careful with money than a property manager, as the board of directors all have skin in the game.
2. I could buy 3 condos for the price of one house so I was able to spread my risk over three properties instead of one. If one tenant moved out, I had 2 more still paying rent. It also reduced the costs of renovation per move-out. Renovating a house after a move-out was significantly more expensive.
3. The rents are high in SoCal so a $350 HOA fee takes a comparatively small bite out of the net. I am not sure of the HOA fees vs rent in your area so the math may be very different
The duplex worked out well also for the same reason listed in #2 above and these allowed me to retire early after 15 years of RE investing! I have have also managed SFR properties, and I promised myself I would never do it again. Too much capital tied up with one renter and high renovation costs.
Best of luck!
@Jesse Hogue I found that it depends on the part of the country. Florida condos were hard to find that worked but my cincinnati condos always work.
All of my investments are in HOAs. I get around the issues by getting a seat on the board. I have 4 properties in one HOA and I became Treasurer of that board, turned the financial health of that HOA around and then exited.
I have 5 more properties in a second HOA. I became President of that board and guided that one through some tough financial issues as well.
It's hard work, but it completely negates the whole "no control" argument that people have.
The key to doing this effectively is to stay focused on the financial issues. Don't get involved in the drama of dog poop discussions and paint colors. Stay focused on the important financial issues, use your investor talent to guide things financially and it works pretty well.
Note that the best financial decision is often NOT going with the lowest bidder or the cheapest solution. Oftentimes it's paying for quality work and materials to make sure things last. Just like the repairs you make in your investments and your own home.
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