CONDOS - Posted by Carmen

Real Estate Investing Real Estate Financing
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Posted by Carmen on March 03, 1999 at 21:21:15:

The sellers are not too interested in giving large discounts because they know they can get their price with financing.

I don’t want to be a landlord, but I do want a monthly income. That’s why I’m considering L/O. Also, there’s almost no work involved - no structural damage, no roof or foundation worries)

Rentals also don’t interest me much on this particular deal because the prices on these condos seem to be going up extremely slowly. I suppose I could be shortsighted, but I still don’t want to deal with tenant problems.

Thanks for the warnings about Fannie Mae - I’ll keep that in mind. I had not heard about the Fannie Mae restrictions. Question is, how would they know? I guess the condo association would have a hand in controlling rentals, and would know. I will also call the HOA tomorrow, to check on any pending assessment.

Good advice. Thank you for sharing.

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CONDOS - Posted by Carmen

Posted by Carmen on March 03, 1999 at 07:39:14:

I have the possibility of purchasing a condo (or more than one) from a seller who owns it outright. The seller is a fledgling investor, and the condo is just too far away for them to deal with. They had to foreclose on the previous buyer, which they had financed.

The deal is the following:

FMV: $30,000
Asking: $28,000
Will take: $25,000
Owner Financing, 9% Interest for 180 months

They want $5,000 down, but they are willing to listen and be a little creative. I’m sure I can get a $5,000 first or second on the property to satisfy them for their cash needs, if it comes to that. Will be talking to them this weekend.

Very, very little work needed - paint, and one room’s worth of carpet. Total about $350.

The condo can be rented/L/O out at about $650/month. On an L/O, probably $700. Homeowners Association Fee is $73/month. Taxes $697/year. Insurance about $300/year.

Seems to me I’d have a cash flow of about $233/month, whether they finance me for the entire $25,000 or whether I get a second for the $5,000 myself.

Am I missing something? I don’t see much about condos here, just wondering. This is Florida, the Condo Capital of the World, and these seem like good opportunities. There are only a few condos, at this price range, that are not considered “adult communities”, and which allow rentals (I’m thinking L/O to get around that one). But this seems like a good niche.

Let me know what you think. Hope everyone’s not too busy with the Convention to answer!

Carmen

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Re: CONDOS - Posted by Reif

Posted by Reif on March 04, 1999 at 01:21:18:

Just two things about condos - toilets are about the ONLY things that you need to worry about as a landlord, everything outside the structure the HOA will take care of, so landlording a condo once you have a tenant in the place is pretty easy.

Second, make sure on your due diligence you look at the latest HOA reserve study and make sure they aren’t about to put on a new roof or some other big assessment, or that they have funds for it, or, at least that you are aware of it and you calculate it in your expenses.

Reif

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Re: CONDOS - Posted by KevinMiami

Posted by KevinMiami on March 04, 1999 at 24:14:40:

This sounds like a good investment to me. Especially if your figures are right. IF you aren’t going to take all of them, then maybe you could e-mail me with more info. GOOD LUCK !!!

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If it’s that easy to get $650/month, why… - Posted by FJW

Posted by FJW on March 03, 1999 at 10:44:10:

didn’t or don’t they do it? It sounds like a good deal, if it’s that easy to find renters for it. My concern would be the demand to buy or rent it. They already seem to be selling at a discount and selling in volume. Why? How long has it been on the market? Is it a very small condo? Are there association/restriction problems? What are the comps? What’s the history of the condo project? What did they sell them for originally? Have they gone up or down in value since then?

Many condos in FLA have gone down since build out in the 80’s and many also tend to stay flat because of rising expenses and maintenance fees. What did they buy it for and when? If it’s so inexpensive, what happened to the people that they foreclosed on? They couldn’t rent it out either? Is it a retirement town or is there work available that people will want, to move into the area? If you were to offer all cash and a quick closing, what would they consider? If you gave them their 5K, would they consider a longer term with maybe a higher interest rate so you can increase cash flow?

There’s obviously lots you can do if they’re flexible. the question is: how are you going to use it or get rid of it once you have it and how easy or hard will it be to do that?

FJW

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Re: CONDOS - Posted by Sue (NC)

Posted by Sue (NC) on March 03, 1999 at 10:15:16:

I usually like to get a better discount going into a deal- the percentage is OK, but that doesn’t translate to big $ on a 30K property. But if the sellers can be creative, this could be a sweet deal anyway.

If you want to be a landlord (& you’re not one already), this sounds like a good place to start. Condos are less work for the landlord than SF, which is a plus.

Also, where I come from, when rents are so far out of whack with market value, the market value climbs to fill the gap over a few years.

Two things to be aware of:

  1. Fannie Mae underwiting (as I understand it) has limits to the number of non-owner occupants in a complex where they will finance, which might crimp your conventional financing options if you don’t go with the seller’s money. It could also affect your resale options down the road, if there is a large % of rentals.

  2. Call the HO Association to check out any pending assessments/problems, etc. to make sure there isn’t an additional cash outlay waiting around the corner.

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Re: If it’s that easy to get $650/month, why…(long answer) - Posted by Carmen

Posted by Carmen on March 03, 1999 at 21:03:02:

The rentals really are in that area (two years ago a friend lived right down the street in a 1-1, and paid $550 - and the building and surroundings were not as nice).

The sellers (who are interested in financing other properties as well, for retail buyers mainly) first financed this condo 3 years ago - they now live about an hour away, and don’t want to deal with it.

I believe that I can find buyers (I don’t want to be a landlord - I want to lease/option so I don’t have to worry about toilets). I have ties into the immigrant communities, so finding a potential buyer should not be difficult - I have some in mind already. The property just went on the market (the owner is a realtor, and had not even put a lockbox on it when I asked to see it - I look up newly-listed properties under $30K and foreclosures, handymans, etc. on a daily basis). The condo is actually quite large - about 1100 sq. ft. The association allows rentals. The comps are about $30K.

What’s the history of the condo project? I’m not sure.
They are going up in value, but slowly. It’s a low-income area, but not a war zone. It may even be a good candidate for section 8 - once I learn more about it.

I’ve stopped trying to understand why someone allows their home to foreclose. The owners are not interested in rental - they don’t want to be landlords.

There is plenty of work in town, especially service jobs, and its not far from the American Expres building, Budweiser distributors and Motorola. And yes, the sellers are flexible - but not very creative with coming up with their own ideas. I will be talking to them on Saturday, and so wanted to hear back to see if I had left something out or had forgotten something important.

I want to get some monthly income coming in - so an L/O would be great for me, especially if I can get about 2K down up front (first, last, security on the “L” part).

Phew! Thanks for your list of questions! It certainly made me think a little harder. I appreciate your input.