If you’re thinking about entering the real estate market, you might be wondering whether or not it’s a good idea to shop for a condo. After all, condos usually are less costly to purchase than houses or townhouses, and they also can offer conveniences you might not otherwise be able to afford.
The bottom line: Condos 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; and if you’re purchasing condos as investment properties, you should be able to find a lender as well.
Yet there are caveats to condominium ownership. Here, realtor.com points out five things to think about before you take the plunge.
1. You don’t own the land
Condos are located in buildings or complexes that consist of multiple units that are individually owned. The entire building is owned by an individual or a property management company, but condo 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.
2. Increased amenities, decreased maintenance
Condo communities may offer amenities and common areas such as pools, a garage or tennis courts that you may not otherwise be able to afford if you’re purchasing a townhouse or standalone house. Condos also 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. But if you’re used to fixing things yourself, you may not always want to wait for the association to do the job or to get pre-approval before calling a repairman. The association may make a special assessment for large projects that you may not always agree with, as well.
3. 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 means there will be greater opportunities for you to meet new people. On the other hand, you likely will have less privacy when you’re sharing walls and building access.
That means 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, and make sure the building is constructed to minimize noise. If you’ve always lived in a single-family residence, you also might consider renting a condo or apartment before you buy.
4. Homeowner’s associations can be bureaucratic
Some condo HOAs can be difficult to deal with or have high monthly association fees, and some HOAs also can 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 when you can afford them. Of course, more single-family homeowners also live with HOAs now, so HOAs are becoming more difficult to avoid.
Ask around about what it’s like to live with an HOA before you join one, and take the time to familiarize yourself with the association’s fees before you buy. You also could 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.
5. Be wary if there are many condos for sale in the building
Unless a condo community is a brand-new construction, 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 might avoid the condo complex; and lenders may even refuse to make loans for new purchases, or might 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? Are the amenities to your liking? Can you comfortably afford the mortgage, including homeowner’s association fees? These considerations will point you in the right direction of a condominium that has ever