CONDOS, FHA AND INVESTORS

Many investors that left the Real Estate market to focus on other endeavors are starting to come out of the woodwork and put their money back into U.S. Housing and for good reason. The Investor realistically is the only entity that is going to get us out of this mess. The FHA waiver of their 90 day flipping rule is helping also, but the one market within Real Estate that is in desperate need of repair is Condominiums. Within the past 6 months FHA has completely changed the rules for the way these properties are funded and insured. I've read study after study regarding FHA as it pertains to Condos and people not only in California but nationwide are saying the same thing. If a complex isn't already FHA approved or grandfathered in then they won't even bother. Here are some of the guidelines that FHA is requiring from the associations in order to insure the loans:

-Investor Ownership- No more than 10% of the units can be owned by one investor. So a small complex (9 units or less) has to be 100% Owner Occupied.
-Delinquent HOA Dues- No more than 15% of the units can be late on their Dues. Large and small projects are being affected by this.
-Owner Occupied Ratio- 50% or more of total units must be Owner Occupied.

There is also a requirement on how much in reserves an association has to keep in regards to their annual budget. The list goes on and on, and with the majority of loans going FHA we have to play by their rules. They've tried to make the search easy to see if an association is already approved, click here for the search, but if you live in an area with a plethora of associations it's hard to pin down which association you're actually looking at. Unless you're looking to buy and hold I would stay away from Condos.

One financial market that is seeing an increase in Condo funding is Hard Money. Private Party Lending requires a large down payment but in many cases with HOAs involved this is the only way someone can claim the title of homeownership. For the time being, we're looking at bumpy roads ahead for Condos and funding.