A Condo that Cash Flows? You bet!

Ah the undervalued, underrated condo; first to fall in value and last to rise when prices head up. With high real estate buying season upon us, it’s time to take […]

April 14, 2011 // Tracy Shaffer // No Comments //

Ah the undervalued, underrated condo; first to fall in value and last to rise when prices head up. With high real estate buying season upon us, it’s time to take a look at one of the most under-performing segments of our market. Wary buyers have justifiably steered clear of a condo purchase as news of HOA woes hit and monthly dues increased with each default. As prices dropped, these former condo buyers found they could get a single family home for about the same dough. Now, many buyers and investors are turning around and seeing the condominium as a bargain, a cash cow, or a viable alternative to home maintenance. So what if you found a great, well-priced property in a condo complex? Do you feel you have enough information to judge the strength of the HOA? If you were able to correctly analyze an HOA you would have an edge on the market because the general market opinion is that all HOAs are weak, poorly managed, and in debt. Ain’t necessarily so.

In our usual cutting-edge market-data style, Your Castle Real Estate has concluded a massive research project, where we analyzed 17 large condo complexes in Denver and Aurora using six major Key Performance Indicators (KPIs) to determine the relative health of each complex. The KPIs included: Operating Income / Operating Expense; Operating Expense / Unit / Month; Months of Receivables; Bad Debt Expense; Reserves per Unit; and Percentage of Units that are Owner Occupied.

Ranking each complex in order from most stable and well-funded to least stable and least well-funded gives us invaluable insight into what condo complexes our clients should be buying into and which to avoid. For Example, Hallscraft Village was a standout in several categories. Not only are there nice units in a nice complex, but our analysis shows their financials are in solid shape and they appear to be a very well-run complex. We concluded that eight of the 17 complexes we analyzed scored very well on the majority of our six KPIs. On the other hand, several of the complexes we looked at are mismanaged, underwater, and nearly defunct.

What does this mean for you? You now have an objective way of evaluating the underlying health of a condo complex and an informed way to minimize your risk. Give me a call, I’d be glad send you the list of condos we looked and how we analyze the data, or join me one of these weekends for the Your Castle Real Estate $40 Cash Flow Condo Tour It’s time to be a smart condo buyer!


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