All Forum Posts by: Brandon Morgan

The building "population" matters. If it is primarily owner occupied, you may run the risk of rental restrictions (rent cap, minimum lease length, etc.) down the road. 

If the building is over 50% non-owner occupied, loan options for a buyer are limited. VA and FHA buyers will likely run into issues if that is the case. The flip side of that is that you are in a more rent/investor friendly building.

It is critically important how well the HOA is managed.

Many HOAs try to keep the monthly HOA fee low, but then run short when major repairs need to be made. In this case, they will assess a Special Assessment. Special Assessments can destroy your projected returns and put you in a cash bind. You will want to see the HOA's financials for the past few years and determine if they have been putting away enough cash every month.

Poorly run HOAs can be an absolute nightmare.  Just google "Zombie Condos" and take a look.

I flipped a condo and a very close friend lived in a townhouse.  I'm biased, but I won't invest in any property that has a homeowners association unless it's way too good to pass up.  The flip wasn't THAT bad, but there were a lot of little extras along the way that ate into our profit.  I can't imagine a long term hold on a condo as being something I would do.  As @Charles Carillo mentioned, these HOAs almost never have enough reserves long term.  You're bound to have a huge assessment at some point for a major repair like siding, roofing, or parking lot maintenance.

@Brandon Morgan

Purchasing a condo vs. a single-family home, offers another level of complexity, especially if you are trying to rent it out. You have to perform your due diligence on not only the unit but also the HOA. You want to make sure you can rent, make sure they have reserves, etc. I would also want to avoid buildings that are mostly (or a larger portion) investors. Investor condo buildings are notorious for having a lot of deferred maintenance, and not enough reserves.

I flipped a condo and a very close friend lived in a townhouse.  I'm biased, but I won't invest in any property that has a homeowners association unless it's way too good to pass up.  The flip wasn't THAT bad, but there were a lot of little extras along the way that ate into our profit.  I can't imagine a long term hold on a condo as being something I would do.  As @Charles Carillo mentioned, these HOAs almost never have enough reserves long term.  You're bound to have a huge assessment at some point for a major repair like siding, roofing, or parking lot maintenance.

I would also agree. A multi would best.

What strategy are you looking to execute long term? 

A lot of my client's initial goal is to cash flow net zero in a duplex while living in one of the units. I'm in Seattle where is market is expensing and competition fierce. What I have seen work instead is jumping into a multi that needs work with negative cash flow, creating value and raising rents.

Although the cash flow is negative in the short term, it much better then paying full rent. Over time, 3-5yrs typically, the cash flow improves to positive, and the equity appreciates significantly.

@Brandon Morgan

Purchasing a condo vs. a single-family home, offers another level of complexity, especially if you are trying to rent it out. You have to perform your due diligence on not only the unit but also the HOA. You want to make sure you can rent, make sure they have reserves, etc. I would also want to avoid buildings that are mostly (or a larger portion) investors. Investor condo buildings are notorious for having a lot of deferred maintenance, and not enough reserves.

@Brandon Morgan What is the most important thing when buying RE?... Location, location, location. 

Regardless of condo or SFH you need to KNOW which locations are BETTER and why. You need do the market research and follow a strategy. What you described is a 1-3 year plan where your leverage an FHA loan, move out, rent it, and buy another property. It's similar to what I did when I bought my first SFH only I used a conventional with 5% DP. I used the rest of my savings (every dime) remodeling the property. I then refi'd the property and put some capital back into my pocket.

Every market is different but in our market single family is more desirable. Our houses are spread out and the city is pretty car centric. People like privacy, fenced in yards, garages, and basements to store their junk. You don't always get those things with a condo. SF appreciates faster than condos. Without knowing your market I'd spend 75% of my time search for SF, and 25% searching for condos.