Posted by Frank Chin on January 29, 2001 at 08:23:45:
I own a condo which I’m currently in the process of selling.
Not clear if you’ll be living there. The Condo Board of mine became restrictive on absentee ownership and restricted 25% to non-resident owners - so I can’t sell to an investor. I got a board resolution granting my unit “investor status” when I bought.
I heard nearby buildings went to hell when it went to 80% absentee-ownership. I checked into buying them really really cheap but backed out after told of the conditions.
The restriction served me well as it kept values up - so I’m not too upset about it.
Here are the details: 2 bedroom condo in nice condition in good complex (65% owner occupied); will rent for $1350 no problem. Market is rising for condos as young people moving into area are pushing up prices; appreciation has been 20% in each of last two years and I think there is room for more growth. Costs exclusive of mortgage payments are $350 (condo fees, taxes, insurance). FMV is $100k. Owner asking $95k and has $55k balance on non-assumable local bank mortgage at 7.5%. Owner and wife have two kids and want to buy home in area; mildly motivated. Not fully aware of value of condo as comps in complex are year old. Option #1 which I asked seller to think about (they seemed interested): Go out and refi the condo at 90% and pull out about $30k after closing costs. This should be enough for downpayment on their next house. THen L/O the condo to me for two years at $1200 with a $200 credit. Option money will be $2k. which is credited toward purchase. Purchase price $100k. I assume maintenance costs up to $500 yr. I make $150/mo and owner will make about $200/mo. But owner will have to give back $200/mo to me as credit toward purchase if I exercise option. Two years down road I earn $6800 credit toward purchase, collect about $3,000 cash flow, and any appreciation on property value. OPTION #2: I buy for about $92k, need $9k for downpayment plus $3k for closing costs (yes, I have gotten and can get 90%LTV investor loans on condos- I have four of them). Not sure yet where I will get the $12k I need but have equity in several other properties; owner probably not that motivated to hold second. Cash flow will be about $350/mo. less the cost of the $12k. Any other ideas??? Or feedback on these two?