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Condos Part 1

Condos Part 1

About a week ago, I got a call from a nice lady who unfortunately was in a difficult situation. She had some condos in West Palm Beach in a 55+ condo community which she was looking to get rid of “yesterday.” She found my website and reached out to me to see if I might be interested in buying her condos. She explained that she had planned to retire in this unit so she planned a complete remodel. The unit was totally gutted and in some cases, walls had been moved. Unfortunately, she had discovered some mold behind some of the walls, and one of her contractors had taken a deposit and didn’t return her phone calls. My heart went out to her because thieving contractors are last thing a retiree needs to worry about! So after getting the backstory, I offered to go take a look at the unit to estimate my costs and to see if it was a property worth buying.

Typically, I try to stay away from condos for several reasons. First, they are expensive to own. Monthly condo fees can range from just a couple of hundred dollars to over a thousand dollars per month. If I hold a property for even just a few months, that amount can go up very quickly. I have to account for that when I estimate my project costs and it ultimately means I have to buy the property for less money than I would otherwise. Second, the “condo commandos” as they are frequently called, can make doing a rehab very difficult. Construction causes noise and the neighbors typically have a low tolerance for that noise. Third, when it comes time to sell the property to the next buyer, there are special rules which govern condo sales and the approval of new residents. Plus, if the buyer is getting a mortgage, I have seen instances where the condo association is required to have sufficient reserves that satisfy the buyer’s lender. All of these issues can make fixing up and selling a condo difficult, if not impossible.

What I like to do is set proper expectations upfront for the seller, to let them know that I am willing to buy their condo, but at a price that takes all of these factors into account.

To be continued….

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Calling all country club community residents

“Calling all country club community residents”

One of the most frequently asked questions I get is “Are you interested in buying my house in a country club community?” Just this week, my Aunt-in-law called me about a real estate auction in her neighborhood. The neighborhood is a well-known and well regarded country club community. The house for sale was previously listed for about a million dollars. I could tell from the expired listing that the inside was gorgeous and was probably worth something close to the list price, except for the fact that the new owner would have to pay over $125,000 as a one-time payment to the club, plus close to $40,000 annually for club dues. Unfortunately, as I’ve seen recently, residents have been moving out of those type of communities with mandatory membership dues, instead of clamoring to get in them, which was the trend 20 years ago. The bidding was to start at just over half a million dollars, so a few minutes of research was worth my time just in case there was an opportunity there.

After doing some homework I declined to bid on the property, but asked my Wife’s Aunt to let me know what happened. “Well,” she said “nobody bid at the asking price and they ended up taking an offer that was below the half-million dollar price.” Nowadays, scenarios like that aren’t too uncommon for these communities. Had there been just a homeowners association and no country club, there would have been a bidding war. Even investors like me are wary of buying into a potential trap. The numbers could make sense, but how long will it take to sell the property once it’s fixed up? What are my holding costs? How many buyers are out there who want to and are able to pay the price of club membership? Chances are that if you’re reading this article, you already know the answer. Not enough.

Now that we’ve established why I don’t really like to buy in country club communities, why do I still send out mailers to their residents? The reason is that often times homeowners in these communities have other properties they want to sell as well, even commercial property. I’ve met doctors who want to sell their medical office building, lawyers who owned the building which housed their practice, and other investors like me who own rental properties or apartment complexes. Just because I don’t buy in country club communities, doesn’t mean there isn’t something I can offer their residents. In fact, I love pivoting the discussion from their primary residence to some other property; these people tend to be very savvy investors.

So if you have received a mailer from me regarding your home in a country club community, you may want to consider speaking with me about your other properties as well, even in other states, because we might just be able to work out a deal!