Are there concerns Buying a condo?

8 Replies

I'm in the Portland Or area & this market is seriously inflated. As I'm looking at areas outside of Portland I'm finding 2/1 condos for under $90K, immediately creating positive cash flow. 

Are there high risks in buying condos? HOA's? property maintenance?

Thx for any input!!

Greg,

Always a concern on dues, special assessments, what type of board members do they have, are they physically sound? Do they have to approve your tenants, what are the rules and regulations, etc ... 

I have seen some where you can’t have any unrelated individuals rent, can only rent out once a year, can’t have Commercial vehicles, limit the number of rentals or they only give out so many “rental certificates “, high app fees for them to approve, the list goes on and on.... perform your due diligence 

Kim Meredith Hampton, Real Estate Agent in FL (#BK0601196)
407-253-9324

A condo is only as good as its Community and HOA, Board of Directors and Property Manager. Perform your Due Diligence, Review the Financials and Budget, Reserve Study, ByLaws and Rules, Is it Rentable, What are the Board Members like, FHA Financing Available, etc.

@Greg Deane I am in completely different market. I am from New York. But I too am apart of two deals involving condos. You have to do you due diligence on these condos because sometimes the harder thing to do is to actually get into the condominium to see the condo. Check into common charges per month?, if they regulate what you can charge as rent?, Maybe do they have a good supervisor that takes care of the place?

A condo isn't bad investment as long as it is a good deal and how much rent you can get from it and you feel that its manageable for yourself.

Hope this was helpful

-James

516-242-2365

Thank you so much everyone! These are great questions to ask. Luckily the condo isn't too far away & is already rented. Going to check it out this weekend!

Hi @Greg Deane ,

There are several risks, but if you're able to find a well run community, it's gold. 

Make sure you get the condo docs. The Rules and Regulations are going to tell you all the leasing restrictions. You'd like to be able to lease immediately without any ownership prior to leasing, or a rental cap. You'd also like to look at the budget and make sure the HOA is saving 10% to their reserves. I always put in the contract to require the last 12 months of board minutes. The budget and the minutes are going to tell you the financial soundness of the community and whether any upcoming assessments are going to happen. If there's an assessment, the board will be talking about it.

A bonus is that the condo is Fannie Mae Approved. That means it fits the low downpayment financing standards set by Fannie Mae. Those requirements are: Reserves savings over 10%, No litigation, no one party owns more than 10% of the total units, low renter and high owner concentration, and sufficient insurance. A condo that's Fannie Mae approved will also give you potential for appreciation and easier to sell, since there's a low downpayment option and allows for more buyers. 

Good luck!

@Greg Deane see if they have been in arbitration yet, if no you can assume that is a good probability that could happen if that does it would prevent you from selling, or only cash offers. 

after my first two quarters being an HOA board member, I think it would be wise to research the property management company a board has guiding them. We have 4 units in one building with water intrusion that will probably need extensive repair. My unit was repaired three years ago, had to jack up the floor above to replace structural beams that rotted. Now another stack of units in my building found the same problem, and last bad rain storm I got a new leak in my ceiling.

Property manager emailed by board several times and I have texted him a couple times, nothing.  

I want to sell at this point.  One thing I would watch if I did another condo is light bulbs.  Out side lights go dark for months.  I bought a long pole to change the garage ones in my car port area myself,  but the light above my upstairs neighbors door has been out for 6 months.  That could have been a sign for me to know how neglected the property would be.  

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