Condos & Townhomes? - Posted by SRobertson

Posted by Jim IL on January 17, 2000 at 21:03:01:

I have done a few of both, townhomes and condos.
There is one thing especially that you need to look into, thats the Home Owners Association.
The HOA will have rules and fees, that may or may not hinder you as a landlord.
Look into them carefully.
Some will not allow rentals at all, and others require you to jump thru hoops as you lease out your property.
and, what does the HOA cover for maintenance etc.?
How much are the fees/assesments?
Sometimes you can get a GREAT deal, and then learn later that the HOA fees went up and KILLED your cash flow.

And, talk to some other owners in the complex, and see if the HOA is self managed or all things are done by an outside contractor, like a property management company? And if it is an “outside company/agent”, are they easy to work with. I have one where the manager is a PAIN, and we still go the rounds every once in a while to get simple things done. (like issueing parking stickers for my tenants.)

Are there any “pending” projects for the complex that will cause the owners to be assessed a certain dollar amount.
Example: What if the parking area, or street in the complex needs to be redone? Does the HOA have enough funds to cover this? or, are they gonna hit up the owners for some CASH to get it done?
Also, think about the “holding time” for your condo/TH.
These do not always move as fast as SFH’s.
You may need to factor in that also.

Just a few things to think about,
Jim IL

P.S. I just thought of one other thing. IF the complex is new, the HOA may still be run by the developer. This means that the HOA fees will be lower…for now. But, when the home owners take over, the fees ALWAYS go up. Take that into account as well.
We almost did a deal that looked good, and then learned that the HOA was about to be taken over by the owners, and the fees were to raise by $100/month. This would have cut my cash flow too low for me, so we did not do the deal.

Condos & Townhomes? - Posted by SRobertson

Posted by SRobertson on January 17, 2000 at 19:53:37:

Can some of you enlighten me as to the pros and cons of investing in condos & townhomes?

I have done two SFR rehabs with verty good results, and am working on my third to use for a buy and hold.

I have looking into condos and townhomes and have seen numerous 2-3 bed units ranging from $14,000-$30,000 in decent neighborhoods.

Rents for similar SFR in area would range from $400-$550 per month. Can I expect to lease condos & townhomes in this same range? Pitfalls?

Thanks in advance for the advice.

Re: Condos & Townhomes? - Posted by Tim (Atlanta)

Posted by Tim (Atlanta) on January 18, 2000 at 06:43:04:

I have some experience to offer here. I have been investing in townhomes to buy/hold/sell over the last 3 years. I have done pretty good in this area, and I have some advice to add to what Jim has said.

First, does the HOA provide any necessary utilities? Such as water, sewer, electricity, cable, telephone,…etc. If the HOA runs out of money and can’t pay the bill, all of the units (yours included) will loose that service. Now you have to bail out the association or loose your tenants.

Generally, condos/townhomes in this area rent for slightly (maybe $200/month) less than SFRs. With the average SFR selling at $90,000 and renting for $850 and the average condo/townhouse selling at $35,000 and renting for $650, you can see why I buy townhomes. Just make sure that the cash flow is there. Never buy a condo/townhouse with a small cash flow. I won’t buy if I can’t make $200 per month positive cash flow after all expenses. Condo/townhomes are much harder to sell, so you need to make your money on the cash flow, not on the sale.

Hope this helps.