Renting Condos/Townhouses

Rehabbing, Fix and Flip, Rental Properties
1

Hello. My main focus at the moment is wholesaling, but I am looking to get into rentals in the next couple years. While single-family homes are much more expensive in this NY area, condos and townhouses are a good deal less.
Any reason I should be wary of these? Good college area too.
Thanks,

2

First of all, make sure the condo association allows rentals. Very important.

3

Read some books about renting.
Or hire pros to manage your properties.
Have cash resrves to cover for vacancies.

4

Thanks. These that I’m looking into are less than 100k, so I gotta figure in the 35%-45% expenses, plus PITI, to see if they could cash flow.

5

I lived in, owned condos for rental. The issues for me are:

  • The complex I owned a condo for rental only allowed 25% of its total units to be rented out, meaning the prior owner may be allowed to rent his out, but when you bought it, it may already over the limit. At closing, we got a letter from the Board President saying we’re allowed to rent. Turned out to be a good move, and because they went thru various managment companies, every few years, we get a letter asking “did you get permission to rent it out”?

  • Beware of special assessments. We bought a condo back in 1992 for 38K, and they were talking about special assessment of 10K per owner to fix a roof. The repair for the landlmarked building cost over a million spread over 104 condo units.

  • Difficult to cash flow with high condo fees. Before the HOA dropped the managment company for poor performance and high fees, the condo was charged $25.00 to change each light bulb, and took the managemnet company two weeks to get to it. Cleaning the common area, landlscaping cost an arm and a leg till the HOA got resident volunteers to do the work. We got charged everytime the managment company had to move its @ss.

  • If you own a SFH, you can put off repairs till it’s convenient for you. But with condo special assessments, you can be out of work, and still have to pay the assessment.

  • Dealing with noisy tenants is a pain. I rented to a quiet young man complaining about the condo next store, two college girls playing music way into the night. Complaints like this has to go through the managment company, forwarded to the HOA, and from there, a letter sent to the offending tenant’s owner, who’ll have to confront the tenant. It was such a nuisance that my tenant almost left. I owned multi’s, and all I have to do is call up the offending tenant and say “turn it down”.

  • Make sure the condo has adequate reserve funds. A condo I lived in catered to a young crowd, often broke. and loathe to raise fees. After running through reserve funds, and eight months behind on the utility bills, they have to pass the hat around to collect a special assessment to pay the gas before it’s cut off. The building runs off a central gas heat system.

  • When a condo’s owner occupied ratio goes below 50%, it becomes impossible to obtain conventional financing when you sell to someone. I would be wary of condos that have NO restrictions on rentals.

  • Having a high ratio of owner occupants means the place is better kept, and volunteer labor to cut costs. I cannot imagine absentee owners coming by to do volunteer landscaping, which would be a problem if the complex is predominently rental.

Hope this helps.