If you are looking to buy into the condo market, then you have plenty of choices that you need to narrow down. Here is your definitive house buying guide for your next condo.
What exactly is a condo?
If you want to become involved with condos, then you must know precisely what a condo is from the perspective of a real estate pro. A condo is not an apartment or a co-op, although they may look similar.
Apartments, co-ops, and condos are all organized as separate units within a larger building. The difference is in the ownership that the resident of the domicile takes of the unit. Apartments usually refer to units that the resident does not own at all. Co-ops refer to units that a resident owns jointly with all other residents in the building. Condos refer to a individualized ownership structure in which the resident owns the domicile but not the community amenities such as the hallways, the lobbies, the gym, or the pool. When you buy a condo, you are buying a private unit that can be subleased and otherwise utilized with much more freedom than an apartment or a co-op can be, depending on the rules of the association that manages the building.
Do I want to connect myself to a community through an association?
When you buy a condo, you are committing financially to a homeowner’s association (HOA). The HOA manages the building in general, setting the rules for all residents, collecting dues, and conducting repairs for the common areas in the building. This may seem like a convenient arrangement, and it is, if all resident pay their dues and the association manages the building well. However, this is not the case in all associations. Members pay late, and HOAs may not be well versed in finding the right contractors or minimizing costs.
All HOAs are required to keep detailed records of their expenditures, and you have a right to ask for these records before you commit yourself to any condo. Check to see if there are any discrepancies between the amount that the HOA collects and what they spend that money on. You should also have a certified home inspector check the entire building, including the public amenities, for signs of wear and tear. The reserve study is another document trail that is becoming more prevalent as governments begin to require a long term assessment of multiunit buildings. The reserve study is a forward thinking document that lists all of the possible renovations that a building will need over the next few decades. You may be able to predict a rise in HOA dues or a potential problem that will lower the value of the property with the reserve study document.
What kind of culture does the condo create?
You will be in very close physical proximity with all of the other people in the building if you choose to invest in a condo. This means that you must choose wisely. If you are not a fan of loud music at night, then you may not want to pick a condo that is right next to a university campus and known to keep the price of units low in order to attract students. At the same time, you may not enjoy a condo environment that is too quiet. Many HOAs try to cultivate goodwill in the community by holding community events for its residents. These are usually the product of condos that are more geared towards families in more upscale areas.
You should be able to get a solid picture of the culture of the building on the condo website. Make sure you compare the pictures on the website to the condition of the rooms that you actually visit. Take note of the associations that put an emphasis on cleanliness and clarity.
Why should I invest in a condo?
If you are trying to locate into an area where the single-family homes may be out of your financial reach, a condo is a great entry-level property into the environment. As you gain equity in the property, you may be able to invest in a more expensive piece of real estate as a move up property.
Investing in a condo might give you luxury amenities that you would not be able to afford under your own roof. Even entry level condo associations will often have community tennis courts, gyms with free weights, swimming pools, and many other luxuries that are not normally associated with an entry level property.
If you are trying to create a social circle in an area, the condo is a great way to get started. People who live in condos tend to have the same lifestyle, work at the same companies in the area, and even attend the same social events. You will always be able to find someone to go out with in a condo, and this is definitely not the case in an unattached single family neighborhood.
Condos have a huge advantage over apartments because of the mortgage interest tax deduction and the ability to build equity in a property. This equity is often used to scale up relatively quickly. A condo can also be rented out while it is not being used, because unlike an apartment or a co-op, the living space actually belongs to the resident free and clear.
2 Point Highlight
When you buy a condo, you are buying a private unit that can be subleased and otherwise utilized with much more freedom than an apartment or a co-op can be, depending on the rules of the association that manages the building.
A condo can also be rented out while it is not being used, because unlike an apartment or a co-op, the living space actually belongs to the resident free and clear.
