Re: Help! nice townhouse at tax sale, but I’m nervous? - Posted by Tim (Atlanta)
Posted by Tim (Atlanta) on December 06, 1999 at 11:46:20:
Don’t know if I am the Lonnie of townhouses, but I do have a good bit of experience over the last 3 years buying, renting and selling townhouses. I am not familiar with the tax sale procedures in your state. But isn’t the price they normally list the starting bid? Or can you actually buy at that price? What is your plan for this property? Rent it out, sell it to an owner occupant or lease-option?
A couple of things to look out for : Make sure the association is in good shape. Do they have a reserve fund? Are there any potential assessments coming up? Is there a lien on the property you are buying for back HOA dues? What does the association provide? I would recommend you stay away from associations that provide necessary services (water, sewer, electricity, … etc). If the association doesn’t pay the bill for some reason, the whole complex is cut off, and you are stuck with a unit that has no utilities.
If you are planning on renting the unit, you should treat it similar to apartments as far as vacancy rates and repair costs. The repairs would be somewhat lower than a single family house, but the vacancy will be higher as well. Most renters treat a townhouse like an apartment, not like a house. So don’t count on the tenants fixing many things on their own. Also, what would it rent for? Normally, I don’t buy unless I can net $200 per month in positive cash flow. That is after 10% vacancy, 25% for repairs. Make sure you take the HOA dues into account.
Just some ideas, get back to us with your success on this deal.