Currently looking at a townhouse property (technically a condo) where there's a solid return (~$350-400 in cash flow after all expenses/vacancy etc) but the issue I'm running into is that the underwriters won't approve the mortgage because the HOA delinquency rate is too high. I approached the seller about seller financing and he's open to it but wondering if it's even a good move to purchase in the first place? Seems this issue about HOW delinquencies won't go away anytime soon and it could be difficult to sell 5 - 10 years down the if needed.
I asked the lenders if I bought cash and the cash out refi-ed if that was an option, and they said they still wouldn't be able to lend based on these HOA issues.
Has anyone had experience with a property like this? Any ideas I've overlooked?
If you're confident this community is worth it, here's what I'd do.
1. Go ahead and buy cash
2. Go to the HOA meetings and get on the board of directors
3. Once you're on the board, make it your personal mission to get those old accounts collected. Find out what the holdup is and then push the agenda.
also to add on to what linda said.. if its a lost cause do not play.. values will be stifled and resale tough
This is a nonwarrantable condo. Risks are higher with nonwarrantables. Ive owned one in the past. You simply need to be aware of the risks associated with it. It is a much less liquid asset, more prone to special assessments, more prone to volatility in values, and largely restrictive to get financing on.
It's not a "technically a condo". It is a condo.
You are looking at a non-warrantable condo. Your financing options are limited to portfolio lenders and unless the delinquencies are addressed, if you try to sell down the line, your borrowers will be limited to either a cash sale or a portfolio lender. Another consideration is in these situations, you will find the investor concentration is higher because most folks will want to use conventional financing to purchase their homes, so that may end up being another reason why it is non-warrantable. If they are already experiencing high delinquency rates, it could already have a high investor concentration, so beware.
If you really want to buy it, those are your options.
@Linda Weygant gave great advice by the way. If you are able to work diligently to clean up the HOA, you could profit handsomely (especially if you buy a few of these).
Thanks for the feedback everyone - if I decide to pull the trigger it's really good to know all this info and go into it with my eyes wide open.
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