We found a condo in our price range and great location about $800 per sq ft in Nolita. Here’s the bad, it has high percentage of rental units 40% and our attorney advises difficulty with obtaining a loan because of no audited financials and reserve is low. Management and the building is frugal (they may argue thrifty) and common charges cover the bare minimum operating costs. What happens to these... [more]
We found a condo in our price range and great location about $800 per sq ft in Nolita. Here’s the bad, it has high percentage of rental units 40% and our attorney advises difficulty with obtaining a loan because of no audited financials and reserve is low. Management and the building is frugal (they may argue thrifty) and common charges cover the bare minimum operating costs. What happens to these types of condos with high rental %, and frugal management. Does the building eventually go to pot as owners can’t sell and more units eventually turn into rentals. Are owners locked into their units and become immobile. Does anyone know of condos in these situations. Do they reach a point where they gravitate towards all rentals because owners can no longer sell their units, so avoid like the plague?
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Response by alanhart
about 15 years ago
Posts: 12397
Member since: Feb 2007
Why no audited financials? When last?
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Response by ctent
about 15 years ago
Posts: 26
Member since: Dec 2010
I don't think any if ever. Why because they did not want to pay for an accountant.
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Response by alanhart
about 15 years ago
Posts: 12397
Member since: Feb 2007
That sounds not-unusual for an HDFC coop -- shocking for a market-rate condo, which I assume that to be. How many units?
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Response by maly
about 15 years ago
Posts: 1377
Member since: Jan 2009
That sounds shady; there is no excuse fot having audited accounts. Is the sponsor still controlling the board because he owns the rentals?
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Response by ctent
about 15 years ago
Posts: 26
Member since: Dec 2010
twenty four units and some have sold for $1100 sq ft in bubble years. So this is very atypical...? I am interested due to price and location. Is not having audited financials worse than the rental situation which may not be a problem at all under if under usual circumstances.
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Response by maly
about 15 years ago
Posts: 1377
Member since: Jan 2009
There are a few concerns, but to me the lack of audited financials would be a deal killer. Especially if the rentals are owned by the sponsor. You're looking at a building run like a rental, where you have no control or transparency.
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Response by ctent
about 15 years ago
Posts: 26
Member since: Dec 2010
No the building had sold out in the early 90's. The board is run by owners. Many of the rentals are the studios and some 1 bd rm units.
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Response by MRussell
about 15 years ago
Posts: 276
Member since: Jan 2010
If your percentage of rentals/commercial space is too high, you ultimately have trouble finding a bank that will give you money in the first place. This leads to lower prices to attract the buyers who have the cash (or 50%).
I almost bought in a situation that was like that, my attorney told me to RUN away from the development. I did.
My advice to you? Find a new building.
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Response by Riversider
about 15 years ago
Posts: 13573
Member since: Apr 2009
Bernie Madoff had audited returns. Condos use accrual accounting and if audited spend a few grand in the process. I think "audited financials" has a nice ring, and doens't buy much beyond that.
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Response by truthskr10
about 15 years ago
Posts: 4088
Member since: Jul 2009
Well the situation is why it's available to you at $800 per sq foot instead of $1000...right?
You have to weigh what's most important to you, accounting risk vs reward.
Suggestion if you really really really like the apartment, buy it and get your azz on the board.
At the very least you'll know what's going on, at the most, you can turn it into a well run condo with audited financials,increased reserves,etc and increase the value of you and your neighbor(s) apartments.
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Response by ctent
about 15 years ago
Posts: 26
Member since: Dec 2010
Yes truthskr10 that does explain the price and we would want to be on the board if we get in.
Crazy question:
Generally are these problems brought on by poor performance of property manager or board's poor leadership?
Why no audited financials? When last?
I don't think any if ever. Why because they did not want to pay for an accountant.
That sounds not-unusual for an HDFC coop -- shocking for a market-rate condo, which I assume that to be. How many units?
That sounds shady; there is no excuse fot having audited accounts. Is the sponsor still controlling the board because he owns the rentals?
twenty four units and some have sold for $1100 sq ft in bubble years. So this is very atypical...? I am interested due to price and location. Is not having audited financials worse than the rental situation which may not be a problem at all under if under usual circumstances.
There are a few concerns, but to me the lack of audited financials would be a deal killer. Especially if the rentals are owned by the sponsor. You're looking at a building run like a rental, where you have no control or transparency.
No the building had sold out in the early 90's. The board is run by owners. Many of the rentals are the studios and some 1 bd rm units.
If your percentage of rentals/commercial space is too high, you ultimately have trouble finding a bank that will give you money in the first place. This leads to lower prices to attract the buyers who have the cash (or 50%).
I almost bought in a situation that was like that, my attorney told me to RUN away from the development. I did.
My advice to you? Find a new building.
Bernie Madoff had audited returns. Condos use accrual accounting and if audited spend a few grand in the process. I think "audited financials" has a nice ring, and doens't buy much beyond that.
Well the situation is why it's available to you at $800 per sq foot instead of $1000...right?
You have to weigh what's most important to you, accounting risk vs reward.
Suggestion if you really really really like the apartment, buy it and get your azz on the board.
At the very least you'll know what's going on, at the most, you can turn it into a well run condo with audited financials,increased reserves,etc and increase the value of you and your neighbor(s) apartments.
Yes truthskr10 that does explain the price and we would want to be on the board if we get in.
Crazy question:
Generally are these problems brought on by poor performance of property manager or board's poor leadership?