Surreal Estate III

How To Lose Money In Condos

So you think you owe too many taxes and need a break, or maybe you have too much money and don't trust America's wealth redistribution system to do the right thing. Well, worry not, comrades, Más Kapital has the red-ink solution to your blues:

Invest in a condo.

But don't just rush out and buy the first one you see, or you run the grave risk of actually making money on it. We know, the odds of that happening are laughably slim, but these 11 failsafe steps will ensure absolutely no chance of a profit...

1. Seek exorbitant Home Owners Association (HOA) fees. Look for building amenities typical of a vacation resort: pool, tennis court, doorman, valet service, etc. Together, they will cost as much as an actual vacation every month without you having to go anywhere. And if you miss a single HOA payment, the Association can seize your property. Forget dot-coms — this is the best money-losing deal of all time!

2. Find a building where one or two investors (not you) own most of the building. This accomplishes two things...

First, Freddie Mac (the agency that buys up home loans) won't touch a building with too many non-resident owners. Renters, you see, are intrinsically evil and just dig on committing property abuse. (And of course, that works in your favor.) Since Freddie won't warrant the property, your bank will charge you an exorbitant mortgage rate — that is, if they lend to you at all. And if you have a hard time buying your condo, imagine how difficult it will be to sell.

Second, those majority investors can mandate obscenely expensive renovations at a whim (such as painting the entire complex in colors inspired by a killer Mardi Gras party), and the other owners will lack the votes to stop them. This means you'll get hit with HOA "one-time assessments," sometimes in the five figures.

3. Hit the suburbs or anywhere else with lots of land left to develop. At first glance, it looks like you're getting a better deal in the burbs, but worry not, because all that new construction around you eliminates any chance of your condo ever appreciating. And the older the building the better, and not just because of the plethora of needed repairs and asbestos contamination. If your building is more than, say, five minutes old, it will continuously depreciate as fresh sparkling condos tempt away buyers year after year...

4. Choose an area prone to natural disasters. Even if you buy insurance (a dubious investment in itself), total destruction of a condo = total loss, because condo owners don't have a stake in the most valuable part of the property: the land beneath it.

5. Choose a city dominated by one employer or industry. One bad financial quarter and your once-merry metropolis will teem with the freshly downsized, dumping their properties and declaring bankruptcy right and left. Since most heavy manufacturing in America is already toast, seek out large service companies with lots of IT people and phone reps who will be offshored soon.

6. Forget college towns. True, thousands of students in a few square miles can be noisy, which could help make your property less appealing. But at the same time, they give the local economy a solid floor, and they have no choice but to rent, which would make your condo a potential cash flow generator. Avoid at all costs!

7. Live next to a porn producer. From personal experience, let us assure you that such a neighbor is not the cornucopia of carnal conviviality you might think he is. Porn producers hold disdain for everything except their own immediate gratification. So expect loud noises at all hours, petty theft, strange cars in your parking space, large scary dogs, smelly drug use, and trash in the halls (some of it in human form) — which is all perfect for sinking your investment.

8. Investigate thoroughly. Condo sellers enjoy a limited "don't ask, don't tell" policy of their own, so they won't volunteer info about evil neighbors, noises and other nuisances that would make the condo irresistible. To ensure that your condo borders the scum of the earth, don't hesitate to ask. And check out your property at night — something most buyers neglect to do — since paradise by day can become delicious purgatory by sundown.

9. Hire a lazy mortgage broker. A bank will handle your loan application readily, and on the web, you can shop for loans effortlessly. This saves money, so hire a middle-man and pay him a massive fee to do it for you. And don't be turned off by his enthusiasm or can-do attitude. With any luck, he will take days to return your phone calls, so that you'll miss the cut-off date for a refund of your condo downpayment. And if you're really lucky, you'll find a broker who's incapable of getting you a loan — even in this economy! — and that means you'll be paying him money for nothing. If you're having a hard time finding such a broker, please for a recommendation.

10. Put down less than 10%. If you're foolish enough to put down 20% or more in cash, you won't have to pay mortgage insurance, which is a negative-investor's wet dream. Mortgage insurance protects your bank — not you — in case you default on your payments. And the beauty of it is that, despite coverage costing you hundreds of dollars per month, your credit rating will still take a massive hit. Only in real estate are you forced to buy expensive coverage that protects everyone but you. Yum!

11. Buy at the peak of a real estate bubble. Which would be ... hey, right now! So what are you waiting for? It's losing time!... [$]