1 bedroom non-warrantable condo valuation

[sputnam]

what the heck is a warrantable condo?

Yeah... what?

 

[J Grant]

Yeah... what?

Lol a unit in a POS condo that can't qualify for financing - we have such condos here but until I saw this post I never heard the word - must be a local thing.

 

[just_one_question]

Virtually the only people who buy in these "non warrantable" condos, in my experience, are investors looking to rent out, and that indeed keeps the building in the kind of status you find it now - a high number of tenants vs owner occupied , which means most lenders won't finance it. The REAL hidden cost, one which you need to be prepared for, is if the building needs major repair or suffers damage later, the building may have lousy financials/low reserves which means a high assessment down the road - and some investor owners might just walk instead of paying it. A few of these buildings in worst case scenario lose their condo status and revert to rentals (meaning you can lose your investment) if enough owners can not pay a big assessment or lien on the condo, such as if there were to be a major lawsuit. One building I appraise in is the exception and graduated to warrantable status, as eventually more owner occupants bought but that was a better location and a newer condo.

Many of these condos look neglected because of high number of renters and owners too cheap to vote to repair or upgrade the common areas/ buildings. If this condo building you are looking at looks in good shape that is a plus. As far as prices, some sell for equivalent amounts as "warrantable " condos, because lax rental policies invite investors to purchase, others sell for between 10-20% less. .

That said, if you want to go forward, what makes it a "good deal" would be if the price and monthly expenses yields a positive cash flow from renting it out, or if you could run it as a profitable air bnb.

Thanks for this, appreciated. I think it's great info!

 

[glenn walker]

We have owned one in the past a small project consisting of 10 condo Units, the partnership purchased
eight of ten units at between 50% and 60% discounts for cash. The two we did not own could not find any
cash buyers so eventually we purchased them at deep discounts and converted all 10 Condos into A 10 Unit Apartment Building Since we then controlled both the HOA and Property Management we later dissolved the HOA and sold all 10 Apartment Units to another Investor who was able to get financing. We got lucky and
sold out at a very large profit BUT that took us almost 13 years and a lot of patience. ( I recommend that you just say no )

RIP Uncle Billy to Glenn ! He once said Glenn the two dumbest things you have ever got us into was that Unwarrantable Condo Project and the Dead Hooker Motel-Thank god you were kin or we would have sued
you into bankruptcy or even left your dead body in that UN-lucky room #13

 

[J Grant]

We have owned one in the past a small project consisting of 10 condo Units, the partnership purchased
eight of ten units at between 50% and 60% discounts for cash. The two we did not own could not find any
cash buyers so eventually we purchased them at deep discounts and converted all 10 Condos into A 10 Unit Apartment Building Since we then controlled both the HOA and Property Management we later dissolved the HOA and sold all 10 Apartment Units to another Investor who was able to get financing. We got lucky and
sold out at a very large profit BUT that took us almost 13 years and a lot of patience. ( I recommend that you just say no )

RIP Uncle Billy to Glenn ! He once said Glenn the two dumbest things you have ever got us into was that Unwarrantable Condo Project and the Dead Hooker Motel-Thank god you were kin or we would have sued
you into bankruptcy or even left your dead body in that UN-lucky room #13

Your post made me laugh!
I've appraised quite a few of these (I just call them condos and the high # of rental units speaks for itself ). There may be a few lenders who lend on them, perhaps in house loans at higher rates , I can't say. But in researching the comp sales nearly all of the sales are for cash.

Of course I'd never write this in the appraisal, but as soon as I drive up to these condos I get the "off" vibe about them from the beat up cars in the parking lot of tenants they get from who knows where and the buildings and grounds looking neglected (love the chipped paint and building cracks and broken stairs look. Must be a design trend ), to the high number of lockboxes on the units etc. The place gives off that creepy vibe - is creepy in USPAP? ( sarcasm )