[quote=4plexowner]I held each of my properties in its own LLC – don’t see any reason to have a parent LLC holding each LLC – I briefly setup a corporation to hold the LLCs but realized that it didn’t make sense for my circumstances – perhaps if your net worth is north of $5 mil having the parent LLC / corp might make sense – keep the properties well insured and have umbrella insurance to cover anything not covered in base policy
LLC tax is $800 per year – each LLC has its own tax return and the bottom line from that return flows into your 1040 – no double whammy – tax only paid on your personal return
That was the easy stuff – now, about purchasing the condo conversion
When I did my condo conversion I did everything right – new roof, fresh stucco, new windows, new water heaters, additional insulation in common walls, etc – this let me feel comfortable about selling the condos and also let me set he HOA fee very low
You’ll have to assess the quality issue yourself or get inspections done – focus on the common areas I listed above
Now, you’ll have to get a copy of the HOA Reserve Review – the review is required at the 2 year point on new condos with an annual follow up – if the condo seller can’t (or won’t) produce this document run (don’t walk) away from the deal – the reserve review will assess the state of the property and then estimate the ongoing expense of maintaining the property – the bottom line on the reserve review is the over/under funding of the HOA – my HOA is currently over funded so we could lower the already low HOA fee if we wanted to
Quality: wow, where to begin – I started with a well constructed 4plex and then did everything right – some of the condo conversions started as poorly constructed apartments and the converter did the minimal amount of work he could get away with and still sell the POS’s – you’ll have to assess this for yourself – in particular, I would look into noise issues inre common walls and floors/ceilings in multi-story properties (hard to imagine that many converters added insulation to these areas)
Utilities are another issue to consider – I’ve seen several horror stories where the HOA is out of money and the property has common utilities that are paid by the HOA – you’re still paying your HOA fees but don’t have utilities because the HOA isn’t paying the common bill – similar story with insurance – if the HOA isn’t paying the insurance bill you won’t get a loan on the property (nor will anyone you want to sell to which means only a cash buyer can purchase)
I’ve always been negative on condos – and that was before the latest negatives popped up (common utilities and insurance) – I say that there is only one form of housing investment worse than condos and that is mobile homes – be very careful buying condos as an investment and be extra special when the condo is a conversion
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What about condo-hotels? i thought those were 2nd from the worst. And timeshares, I think by far are the worst 🙂
