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Old 02-21-2021, 07:29 PM
 
2 posts, read 123 times
Reputation: 10

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I'm thinking of investing in a one bedroom condo short sale of around 800 square feet. The building is about 100 years old, and two units have not paid their HOA fees for months. The problem is that this particular unit has been on the market for 200 days, but it is a safe location near Metra train (walking distance) and it's a very nice unit (just needs a paint job). I offered a low ball amount which the bank has to accept (seller accepted), but it seems to good to be true.

In the meantime, I looked into the following:

The maintenance budget - they're looking at replacing an old boiler for $40K and taking out a loan to do it. I asked about this, and what our potential cost might be, but the seller refuses to answer.

The tenant has a good credit history, but rents on a month to month basis, no lease, because she's related to the current owner.

Other units have gone for about 20K more in the recent past.

There are currently no units for sale for sale in this building, nor did I find much in Forest Park with similar comps for sale at anywhere near my offer price.

Taxes are kind of high, but not unreasonable for the area or nearby suburbs, like Oak Park.

The school is Proviso East, so not that great, but we're just looking to rent it to an adult without kids.

Pets are allowed.

HOA fees are around $100 more on average.

What else should I be looking for or wary about? Thank you in advance!!
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Old 02-22-2021, 05:50 AM
 
Location: In the land beyond Ohare!
1,664 posts, read 1,091,634 times
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Quote:
Originally Posted by norespect View Post
The maintenance budget - they're looking at replacing an old boiler for $40K and taking out a loan to do it. I asked about this, and what our potential cost might be, but the seller refuses to answer.
RUN away from this!
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Old 02-22-2021, 08:41 AM
wjj
 
794 posts, read 918,276 times
Reputation: 940
First and foremost, you need to be talking to a good real estate attorney or you could be in for a world of hurt. A few general comments below to consider since the answers will vary from state to state and even locality to locality.



Quote:
Originally Posted by norespect View Post
I'm thinking of investing in a one bedroom condo short sale of around 800 square feet. The building is about 100 years old, and two units have not paid their HOA fees for months. The problem is that this particular unit has been on the market for 200 days, but it is a safe location near Metra train (walking distance) and it's a very nice unit (just needs a paint job). I offered a low ball amount which the bank has to accept (seller accepted), but it seems to good to be true.



Initial question.....is this really a bank short sale or is it an association foreclosure for unpaid assessments? Or both?


You could be liable for the unpaid assessments and any other unpaid/uncorrected items through the estoppel process. Your attorney should look into this.


In the meantime, I looked into the following:

The maintenance budget - they're looking at replacing an old boiler for $40K and taking out a loan to do it. I asked about this, and what our potential cost might be, but the seller refuses to answer.



The seller might not know. This is a question for the association board. If the association has proper reserves and the reserves are fully funded, the answer could be that you would owe nothing additional. If the association has no reserves and makes capital expenditures though special assessments, you could be out a lot, now and in the future with a 100 year old building. IMO, properly funded reserves are critical for any condo or homeowners association.


The tenant has a good credit history, but rents on a month to month basis, no lease, because she's related to the current owner.


I am surprised that the condo association would allow a series of one month leases (whether formalized or not). Check the condo CC&Rs. Also, with all of the varying eviction moratoriums, you might not be able to get the renter out if you decide to go with a tenant on a long term lease.


Other units have gone for about 20K more in the recent past.

There are currently no units for sale for sale in this building, nor did I find much in Forest Park with similar comps for sale at anywhere near my offer price.


Are you a cash buyer or are you going to finance the purchase? If financing, your lender will be looking at the number of resident owned vs investor owned units. Do you know that number?


Taxes are kind of high, but not unreasonable for the area or nearby suburbs, like Oak Park.

The school is Proviso East, so not that great, but we're just looking to rent it to an adult without kids.


But by doing that, you are eliminating a large market segment potentially limiting the amount of rent you could collect.


Pets are allowed.

HOA fees are around $100 more on average.


More than what?


What else should I be looking for or wary about? Thank you in advance!!

There are a lot of unknowns. Might want to pass on this. But definitely engage a good real estate attorney.
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Old 02-22-2021, 06:01 PM
 
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Thank you for the responses. It helped a great deal.
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Old Today, 10:59 AM
 
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Completely agree with wjj. Something else to watch out for is plumbing. I'm looking at places now and learning more about what an issue plumbing within a condo can be. Much success to you!
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