Too much $ in IRA's how to buy a condo

[COcheesehead]

I consider it MANDATORY, along with the reserve level (how much money is in the reserve).

I once backed out of a great buy on a condo because the reserve study showed upcoming HUGE expenses , and the reserve level was extremely low. Meaning special assessments ($$$$) were coming hard and fast over the next few years.
That's why the folks wanted to sell fast and get out.

The lack of a reserve study also shows lack of good HOA management.

 

[jazz4cash]

With condos make sure you understand the reserves and ask to see the reserve study. If they don’t have a reserve study - run. If the HOA does not have adequate reserves, buyer beware. The last thing you want is an unexpected special assessment.

I had looked at a condo and inquired about the HOA ratio (% of owners delinquent) but was told the info was not available until an offer was submitted. I believe an FHA loan requires 15% max delinquency rate. Maybe I used the wrong vernacular. I assume a reserve study includes that data. Who exactly is entitled to view a reserve study?

 

[cathy63]

I had looked at a condo and inquired about the HOA ratio (% of owners delinquent) but was told the info was not available until an offer was submitted. I believe an FHA loan requires 15% max delinquency rate. Maybe I used the wrong vernacular. I assume a reserve study includes that data. Who exactly is entitled to view a reserve study?

Reserve studies only have to be done every 3(?) years, so they do not show the current delinquency rate. That would be in the monthly or annual financial statement. I think the best way to handle something like this would be to make an offer contingent on the unit qualifying for an FHA loan.

It cost us (the sellers) $175 to get a docs package from our condo management company for our escrow this month. I wouldn't have paid for that prior to getting an offer, but I guess if a potential buyer wanted to pay it they could have. This package includes CC&Rs, Bylaws, board meeting minutes, reserve study and current financials, and it is given to the buyer before escrow closes.

I did provide a link to the online version of the CC&Rs, Bylaws and current rules prior to getting an offer.

 

[pb4uski]

All of our documents are available on our website that is open to all owners who register, so any owner planning to sell can download PDFs. The Bylaws and Declarations are available on the county's website.

 

[COcheesehead]

I had looked at a condo and inquired about the HOA ratio (% of owners delinquent) but was told the info was not available until an offer was submitted. I believe an FHA loan requires 15% max delinquency rate. Maybe I used the wrong vernacular. I assume a reserve study includes that data. Who exactly is entitled to view a reserve study?

A reserve study is a comprehensive analysis of the replacement costs and timing of those replacements of everything on the property from patios to railings to roofs. When I was on HOA boards it was required to make this info public and it was contained on the HOA website. Laws may vary by state, but that’s the way it was in Colorado.
Once you see the reserve study, you can then decide how deficient the property’s reserves are in comparison.

 

[wallygator69]

Wow! Wasn't expecting the thread to continue but glad it did. Appreciate all the things that should be looking at when buying a condo.


Awesome!



Thank You!


Wally

 

[bloom2708]

$700k of $1.95m is too much on a house/condo. I would adjust and not spend that much.

 

[ivinsfan]

Are your pensions COLA adjusted?


The issue as I see it with a big mortgage is that there will be a precipitous drop in income when one of you passes.. what would be your survivor number for your pension...

 

[RetiredHappy]

$700k of $1.95m is too much on a house/condo. I would adjust and not spend that much.

I don't think so if pensions do indeed cover cost of living expenses. The issue that I see is that home ownership is expensive as it comes with increased expenses wrt maintenance cost (plan for minimum of $10K per year of unexpected cost), insurance, property tax, larger utility bills, and goodness knows what.

 

[NXR7]

I got my snowbird condo mortgage through Third Federal Savings and Loan* several years before my pension began. I had to show them proof of funds, insurance papers, etc. but had absolutely no issue getting pre-approved for more than I ended-up spending on my condo.

At closing, my lawyer said he'd looked up Third Federal and was surprised to learn how big they were in the home mortgage business across the U.S.

*https://www.thirdfederal.com/ if you care to check their rates

I worked for them for a long time. TFSL never had loan officers on commission since they opened in 1938. They cherry pick the best applicants so their default and loss rates are very, very low. Their focus has always been Customer First but for real.

The CEO has been quoted as saying "Family first and work second" and the bank really practices it. If an employee, for example, had a kid doing a play in the middle of the work day then other employees would cover their work so the parent could attend. Plus many other examples.

TFS will sell loans to gain capital for future loans but has never sold the servicing of a loan and says they never will. The benefit to the customer is that you will deal with TFS for the full loan period, not some other company five years from now.


If you want a good dividend stock look at TFSL. It's 28 cents per share quarterly and at their current price it's a 7.8% yield.

TFSL has an uncommon corporate structure because they're a mutual holding company that completed one of the two steps to go fully public and have said they will never do the second step.

The holding company that only owns the bank, TFS Financial, is the TFSL stock symbol and they own 81% of the stock. The implication of that is that the holding company should receive 81% of the "dividend pot" but each year the holding company takes a vote to waive their share of the dividend. It passes each year with a wide margin.

That means that the remaining 19% of shareholders receive 100% of the dividend pot.

I know, uncommon, eh? This odd structure causes the investment bots to miscalculate the TFSL dividend payout and report that the company routinely pays a dividend far exceeding their income. They don't. But if the dividend waiver vote ever fails then the amount of money going to the individual shareholders will drop dramatically.

TFSL has to hold that "dividend waiver" vote each year because the company Directors who set the dividend are shareholders. So the Fed sees it as a conflict of interest that requires a vote each year.

Oh, and if an analyst like Zacks says something about the management discussion on the conference call, TFSL has not held one in about a decade. That analyst is just posting standard BS and not a real analysis.

 

[NXR7]

I consider it MANDATORY, along with the reserve level (how much money is in the reserve).

After that condo collapse in Florida and a few other bad buildings needing evacuated Florida passed a law mandating a structural study and a large percentage reserve fund. This is expected to blast the Florida condo HOA fees through the roof.

https://www.nbcmiami.com/responds/c...form-new-reserve-funding-requirement/2788269/

https://ssclawfirm.com/news-events/in-the-news/new-reserve-requirements

Florida Condo Buyers Beware. And probably other states soon as well.

 

[COcheesehead]

After that condo collapse in Florida and a few other bad buildings needing evacuated Florida passed a law mandating a structural study and a large percentage reserve fund. This is expected to blast the Florida condo HOA fees through the roof.

https://www.nbcmiami.com/responds/c...form-new-reserve-funding-requirement/2788269/

https://ssclawfirm.com/news-events/in-the-news/new-reserve-requirements

Florida Condo Buyers Beware. And probably other states soon as well.

Probably a good thing. Pay me now or pay me later kind of thing.

 

[pb4uski]

After that condo collapse in Florida and a few other bad buildings needing evacuated Florida passed a law mandating a structural study and a large percentage reserve fund. This is expected to blast the Florida condo HOA fees through the roof.

https://www.nbcmiami.com/responds/c...form-new-reserve-funding-requirement/2788269/

https://ssclawfirm.com/news-events/in-the-news/new-reserve-requirements

Florida Condo Buyers Beware. And probably other states soon as well.

The mandates only apply to buildings of three stories or more, so does not apply to buildings of two stories or less which are a lot of Florida condominium buildings... in our area anyway.

But it is alarming how many owners and Boards are shortsignted and refuse to carry prudent reserves. We had one owner object to roof reserve assessments since since he would be pushing up daisies by the time new roofs would be needed.

 

[Buckeye]

You don’t say how much your rent is, if you can trade a rent payment for a mortgage payment without using up too much of your taxable assets, I would do that. Rent will continue to go up, a mortgage is set for the term.
You may have issues getting a mortgage without predictable income so you may have to wait for some of those pensions to kick in.
With condos make sure you understand the reserves and ask to see the reserve study. If they don’t have a reserve study - run. If the HOA does not have adequate reserves, buyer beware. The last thing you want is an unexpected special assessment.

When we were in this situation, all we had to do was set up a periodic (monthly) withdrawal from our taxable account a few months before we applied for a mortgage. Be sure the amount of your monthly draw is adequate to support the amount of the mortgage you think you want/need. As soon as you close on your loan, you can stop or reduce the amount of your monthly draw. Incredibly simple solution but it took me a couple of years to find the knowledgeable mortgage guy who advised me to do this. No issue getting a VA loan.

 

[NXR7]

But it is alarming how many owners and Boards are shortsignted and refuse to carry prudent reserves. We had one owner object to roof reserve assessments since since he would be pushing up daisies by the time new roofs would be needed.

Ohio has a law for condo reserve funds but there was so much opposition that the lawmakers included a clause that allowed a supermajority of owners to block it, something like 70% of owners.

At my mom's place the increase in the reserve fund was opposed by over 90% of owners for pretty much the same reasons. They likely would have moved away before it was needed and the increase in the reserve fund would have made the HOA fees higher than surrounding condos, which would affect their ability to sell the unit.

There are condos as part of the apartment complex in VA where my kid lives. They had so many structural problems that the Board enacted a massive increase in the HOA fee to cover the 2+ million needed for the repairs. The HOA fees went to about $800 a month, hundreds more. The residents banded together and tried to get the courts to block it but under VA law the courts did not have jurisdiction for some reason.

Surprise, surprise. The HOA increase had a sunset clause to expire at the end of 2021 when the fund would cover the repairs already in progress. Nope, it got extended by the Board, probably because people are now used to it and due to inflation.

My kid was ready to buy one of the condos, knowing the HOA fee was going to drop a bunch, because the selling price of those condos in Tysons Corner were under $250K due to the HOA fee being much higher but they held off. They're now waiting to see if the Board extends the HOA increase or makes it permanent.

Low selling prices plus high HOA = lower equity and a slower increase in future selling prices due to the high HOA = extreme caution needed, at least for younger folks.

 

[jazz4cash]

I worked for them for a long time. TFSL never had loan officers on commission since they opened in 1938. They cherry pick the best applicants so their default and loss rates are very, very low. Their focus has always been Customer First but for real.

That’s GREAT insight coming from an ex employee. I stumbled on them for a HELOC and I was so impressed with the customer service I dug deeper and learned about the stock, dividend, and unusual management structure. I bought some stock which is under water now but it’s a small amount. do get the dividend waiver proxy every year It’s amazing how often analyst’s screw up the dividend payout. They have decent CD rates from time to time as well.

 

[FIREarly]

I ended-up getting a 2.89% mortgage for 10 years.

Do they honor a new mortgage at that rate today!?!

 

[cnocmmz]

We currently are 59 years old and are renting. No kids. Our total annual expenses are $50k per year. We would like to buy a condo in the next 2 years in the $700k range. We have only $530k in non retirement accounts. What would you do? We'd have to wipe out DW Roth to buy it and fund Retirement til 65 years old.. I’d hate a mortgage but that may make sense…Thoughts?

Our plans for various reasons
SS at 65 $2667/month or $32k /yr
DW SS at 62 $1513/month or $18k/yr
Pension at 65 $213/month or $2.6k/yr
DW pens at 65 $1336/month or $16k/yr

Total $5729/ month or $68,600/year

Current holdings all in MM or Treasuries/Ibonds

My IRA $270k
My Roth $325k
DW IRA $330K
DW Roth $350K
Brokerage $530k
(Taxable)
Ibonds $70k
HSA $75k
Checking $25k

Total $1,975,000


Thank You,


Wally

Hi Wally
I would recommend focusing on the guaranteed income you have coming in, which for I can see is a little shy of your requirements for living. The income #s you proposed are before taxes I believe so? Also not sure expending your roth’s to funds this is best idea. I would recommend speaking to your CPA. One question would be, do you need a 700k condo in retirement?
One thing we have learned since we recently retired 1 year ago is that you WILL spend more than you think, even if you budget. It is just life with travel, eating out, toys etc. just something to ponder.