Opportunity to buy 14 condos , need advice... - Posted by Ben

Posted by NJDave on February 10, 2000 at 18:02:26:

During my tenure with GECap, we had occassion to hold scores of foreclosed mortgages on condo complexes in northern New Jersey. The trouble we had with selling these units (even at substantial discount) was the issue of condominium &/or association fees. The Condo Associations were usually bankrupt, and unable to meet expenses including routine maintenance. Forget about emergency repairs… The mortgagors who actually were paying on their loans had to shoulder the burden of EXTRA association fees from those who were not paying them.

If you were to purchase a block of mortgages/units, make sure that the Condo Association is sound, properly run, and their books in order. Demand a very comprehensive property inspection to protect against ‘unanticipated’ expenditures.

If you proceed with the purchase, you may want to place your own ‘eyes and ears’ on their board, to keep you abreast of the goings on…

Opportunity to buy 14 condos , need advice… - Posted by Ben

Posted by Ben on February 10, 2000 at 17:05:05:

I have been dealing with a bank which has foreclosed on a
30 unit condo complex and has been selling the units individually. They now have 14 left and are offering quite a deal to anyone who will buy all 14 in one shot. An appraisal shows the 14 to be worth $660,000. They want
$550,000 and are so motivated they are willing to take
a downpayment as little as $25,000 and hold paper on the rest at 8.5% interest. Every one of the units is presently leased and the net operating expenses (figured conservatively, even including a 10% vacancy rate) is $55,000. Neighborhood is lower-middle class but ok. I have never done a deal this size, so I want to make sure I am not missing anything, (i.e debt service etc.) The bank has also alluded to the fact that the more I put down, the more flexible they can be on the price. I am capable of paying ALL cash if that would give me a tremendous deal. What is the best course of action? By the way, the property is close by and I do have people who could effectively manage it. Help!

Re: Opportunity to buy 14 condos , need advice… - Posted by Tim (Atlanta)

Posted by Tim (Atlanta) on February 11, 2000 at 07:14:26:

I’m with NJDave. Be careful of the association. I purchased a package of 4 townhomes about 3 years ago, and didn’t investigate the association fully enough. The community was going through a major rebirth, so I thought it would turn around. Boy, was I wrong. The association is actually responsible for providing the water to the units. There are a ton of deadbeat owners in the complex who do not pay their dues. This means that the association doesn’t pay the water bill, and the county shuts off the water. You can see the problem with renting out units that have no water. The county has shut off the water several times in the past for a few days each time. The people come up with the money, and the county turns the water back on. But that only works for this month. The problem arises again next month. Luckily I can sell my units at a huge discount and still make a good return.

Make sure you check out the association, and NEVER buy a condo/townhome where the association provides any necessary service.

Just my .02

Re: Opportunity to buy 14 condos , need advice… - Posted by Kenneth

Posted by Kenneth on February 10, 2000 at 21:24:06:

Find out what the FMV per individual unit. If you can get a substantial discount for paying all cash for all of them, do so and then sell them individually for FMV or refinance and get cash out and rent them.

Re: Opportunity to buy 14 condos , need advice… - Posted by Kenneth

Posted by Kenneth on February 10, 2000 at 20:57:16:

Find out what the FMV per individual unit. If you can get a substantial discount for paying all cash for all of them, do so and then sell them individually for FMV or refinance and get cash out and rent them.