Quick question for anyone who has ever purchased a condo (buy and hold) for rental purposes. I recently went through an inspection of the unit/building and there were some minor water leaks (slow drip) in the basement where I was told can lead to long-term problems. I haven't contacted the association yet, but since this is in an older building in a diverse up-and-coming neighborhood, would you factor this into your decision whether to purchase the property or not? There were a couple water buckets in the basement where the two leaks were occurring so I would assume the association is aware the issue exists. Maybe I'm just placing too much emphasis on this detail and not factoring in the otherwise great investment of the condo? I'm also requesting association minutes and statements of their current reserve.
The condo itself is in decent condition for a rental and has no major problems.
This is my second home purchase (first was my primary residence) and would be my first investment property; very exciting step!
Ryan - congrats on moving forward with your first investment property. I have 6 buy/hold investment condos in three different complexes here in AZ. I know these complexes fairly well and know they are fairly well managed in terms of maintenance and financial reserves for cap-ex expenditures. Still, I have had at least one special assessment occur that impacted two of the units to the tune of about $1100 each for roof repairs. So going into the deal with eyes-wide-open, you'll definitely want to know what the HOA is planning to do about the leaks and if it will be considered a normal expense or an extraordinary expense resulting in an assessment beyond the HOA monthly collection. HOAs are not always receptive to providing financial data or historic data regarding assessments (could be an indicator of poor maintenance budgeting) so you may want to use your realtor as a source to pursue getting details about the leak and the financials. You could also ask neighbors/residents for this type of info and their opinion on the HOA and complex. Hopes this helps and best of luck! Dave
I was on a HOA board for few years and have to tell you that those places can be a mess. I would check their budget and see how much money they regularly save in reserves (10% of the total annual budget is a good number), and also their capital project lines to see if there is anything major being planned. Lawyers ask HOA for 'letter of paid assessment' and to fill out some questionnaire/disclosure, but the management company answers those questions based on their knowledge at the moment, and they may not be officially aware (if board of directors have not officially discussed it) are that there is anything like special assessments coming in near future. Major plumbing leaks can be one of those large capital projects that requires special assessments, especially when there was no reserves.
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