Opinions on condo purchase with 24% HOA delinquency?

Question

I'm in escrow to buy a condo to be used as a rental. There is a 24% HOA delinquency. This is making financing challenging but not impossible. The unit is nice. The area is good and values are predicted to rise. There is some deferred maintenance at the complex but mostly okay. I met some tenants and they like the place. I met them as they stopped by, wondering if "my" unit was available for rent. There is a new management company. Condos are still selling at the complex.

In the opinion of experienced people: is the 24% delinquency a deal breaker? Would you advise going forward or canceling? What other info should I seek out to help me decide? Thanks in advance.

In the opinion of experienced people: is the 24% delinquency a deal breaker?  Would you advise going forward or canceling?  What other info should I seek out to help me decide?  Thanks in advance.

Eve Mahoney · Answer

Hello everyone, thanks for your input!  I cancelled that purchase.  The owner occupancy rate was about 40%. The deferred maintenance - hallways dark and dingy, the small gym looked old and run down, and other things like that - started to worry me in that they would not be fixed or get worse.

I found financing, somewhat more costly in fees but okay.  I planned (and still do plan) to put down 25% and have excellent credit.

In my market it is impossible to avoid HOAs and nearly impossible to find over 51% owner occupancy.

I am interested in a different place now; still trying to find out about any HOA delinquency.  This place is bigger and needs some work but has the potential to bring a much higher rent.  My offer has not (yet) been accepted so, I'll see.  John, thanks for your story of the place in SF, glad it worked out even the HOA problems.  I'm hoping for cash flow positive and think this latest place could do it.

John Barnette · Answer

Would be important to know why there is so much delinquency in the HOA given that it is in a good market with high incomes. Good economy last several years.  Does make financing difficult. Not going to be traditional Fannie/Freddie backed loans. Portfolio may be a good source. First Republic Bank in is SoCal.  Will need good/great credit scores and probably 25% plus down.  The condo should be discounted quite a bit as well due to the issues.

I personally bought into such a situation back in the black days of 2010 in San Francisco. Lots of HOA problems, back dues owed, short sale, etc. Had to go hard money. But bought a condo with tenants very very cash flow positive for 73% less than it had sold in 2005.  Yes it as a tough time back then, but not 73% tough and rents never went down a penny. Actually went up.

Shannon Wright · Answer

24% delinquency by private party owners? What is the owner occupancy rate? Is this a new HOA? What do you mean by "Condos are still selling at the complex."?