By Patricia-Anne Tom
If you’re a potential buyer in the real estate market, you may wonder, “Should I buy a condo?” Condominiums are generally less costly to purchase than houses or townhouses, and they can offer conveniences you might not otherwise be able to afford. In fact, some buyers who are priced out of single-family homes in high-priced markets may qualify only for mortgage loans on condos or co-ops.
Condominiums can be a good investment, especially if they allow you as a buyer to enter the real estate market. Qualifying for financing is much the same as getting a mortgage for a single-family home. If you are purchasing condos as investment properties, you should be able to find a lender as well.
Yet there are caveats to condominium ownership. Here are five things to think about before you take the plunge.
You don’t own the land
A condo building is a building or complex consisting of multiple apartments that are individually owned. The entire building is owned by an individual or a property management company, but condo unit owners do not hold the title to the land on which the structure sits. This means the value of the property you own will consist solely of your condo.
Don’t confuse a condominium with a co-op. With a condo, you own a specific part of the building structure, and the use of common areas. With a co-op, or housing cooperative, you own a share of the real estate. As a real estate shareholder, you have the right to live in a certain unit.
On the pro side, living in a condo means you have use of the real estate, but you won’t be spending your weekends mowing the lawn.
On the con side, you can’t change the landscaping and you have to share the common areas with other owners.
Increased amenities, decreased maintenance
Condo communities may offer amenities and common areas (e.g., pools, a garage, or tennis courts) that you may not otherwise be able to afford if purchasing a townhouse or standalone house.
Additionally, condos can relieve you of the need to manage the building maintenance and any amenities. Some interior issues such as plumbing and electricity may be managed by the complex’s community association. You still own your unit, however, so you can decorate and personalize more than you are allowed to as a renter.
If you’re used to fixing things yourself, however, you may not always want to wait for the association to do the job, or get pre-approval before you call a repairman. Also, the association may make a special assessment for large projects, which you may not always agree with.
Built-in social network
Socially, condos can be great owner-occupied properties for singles, couples, and families. Your proximity to your neighbors and access to shared areas mean there will be greater opportunities for you to meet new people.
On the other hand, you’re likely to have less privacy when you’re sharing walls and building access. Neighbors might be able to hear your conversations or see when you come and go.
Before buying, check to see if the other condo owners are friendly and seem likely to be people with whom you would get along. Make sure the building is constructed to minimize noise. If you’ve always lived in a single-family residence, consider renting a condo or apartment before you buy.
Homeowners associations can be bureaucratic
This is obviously a case-by-case situation, but some condo HOAs can be difficult to deal with or have high monthly association fees. Some HOAs can be politicized and hold you accountable for any perceived infringement of rules. Most associations will impose building maintenance fees, whereas in a single-family home you pay for expensive renovations or maintenance projects at a time when you can afford them.
Of course, more single-family homeowners also live with HOAs now, so HOAs are becoming harder to avoid. Ask around about what it’s like to live with an HOA before you join one.
Always take the time to be familiar with the association’s fees before you buy. You could also look at the minutes of the community association’s meetings to see if there are outstanding maintenance issues that are likely to be expensive.
If you are considering purchasing an investment property, be certain that the condo association will allow you to rent out the condo unit on a short-term or long-term basis, before you buy.
Be wary if there are many condos for sale in the building
Unless a condo community is a brand-new construction looking to welcome its first group of condo owners, you might want to think twice about purchasing in a community with many properties for sale. This could mean that there is a high level of dissatisfaction with the building and living conditions.
If more vacancies appear and things spiral downward, the association may fall behind on upkeep, and lose its reserve fund. More buyers avoid the condo complex. Lenders may even refuse to make loans for new purchases, or they may require a larger down payment. Even if all goes well now, you may have a difficult time when you want to sell or refinance.
If you do find your dream home in a community that seems slightly abandoned, try to chat with a resident or two when you tour the condo to see if there are any red flags.
Ultimately, keep these questions in mind: Do you like the condo’s size? Is it in the right neighborhood? Is the building properly maintained and are the amenities to your liking? Can you comfortably afford the mortgage, including homeowners association fees? These considerations will point you in the right direction of a condominium that has everything you want in a home.