Should I Buy a Condo? The Pros and Cons
If you are a potential buyer in the real estate market, you may be wondering if a condo is right for you. Condos are often less expensive to purchase than houses or townhouses, and they can offer amenities that you may not be able to afford. In fact, some buyers who are excluded from single-family homes in higher-priced markets may only qualify for mortgages on condos or co-ops.
Condominiums can be a good investment, especially if they allow you to enter the real estate market as a buyer. Qualifying for financing is essentially the same as getting a mortgage on a single-family home. If you are purchasing a condominium as an investment property, you should also be able to find a lender.
However, there are some caveats to condo ownership. Here are five things to consider before you buy.
You don’t own the land
An apartment building is a building or complex consisting of multiple apartments that are independently owned. The entire building is owned by an individual or property management company, but the owner of the condominium unit does not own the land on which the building sits. This means that the value of the property you own will consist of your condo alone.
Do not confuse a condominium with a co-op. In a condominium, you own a specific part of the building structure, as well as the use of the 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 particular unit.
On the plus side, living in a condominium means you get to use the real estate, but you don’t spend your weekends mowing the lawn.
On the flip side, you can’t change the landscape and you have to share the common areas with other owners.
Increased amenities, decreased maintenance
Condo communities may offer amenities and common areas (such as a pool, garage or tennis courts) that you may not be able to afford if you purchase a townhouse or detached home.
In addition, condominiums can relieve you of the need to manage building maintenance and any amenities. Some interior issues, such as plumbing and electricity, may be managed by the complex’s community association. However, you still own your unit, so you can decorate and personalize it more than you would as a tenant.
However, if you’re used to fixing things yourself, you may not always want to wait for the association to do the work or get pre-approval before you call a maintenance person. Also, the association may have special assessments for large projects that you may not always agree to.
Built-in social network
Socially, an apartment can be a great home ownership property for singles, couples and families. Your proximity to neighbors and access to shared areas means you will have more opportunities to meet new people.
On the other hand, when you share walls and building access, you may have less privacy. Neighbors may hear your conversations or see you coming and going.
Before you buy, check to see if the other apartment owners are friendly and likely to be people you get along with. Make sure the structure of the building minimizes noise. If you have been living in a single-family home, consider renting an apartment or condominium before buying a home.
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 rule violations. Most associations levy building maintenance fees, and in a single family home you pay for expensive renovations or maintenance items when you can afford them.
Of course, more single family homeowners are now living in HOAs as well, so HOAs are becoming harder to avoid. Before you join an HOA, inquire about what it’s like to live with an HOA.
Make sure you take the time to familiarize yourself with the association’s fees before you buy. You can also look at the minutes of the community association meetings to see if there are outstanding maintenance issues that are likely to be expensive.
If you are considering purchasing an investment property, determine if the condominium association will allow you to rent the condominium 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 building looking to welcome its first condo owners, you may want to think twice about buying in a community where there are many properties for sale. This may mean that there is a high level of dissatisfaction with the building and living conditions.
If there are more vacant homes and things take a sharp turn for the worse, the association could fall behind in maintenance and lose its reserve fund. More buyers will avoid the condo building. Lenders may even refuse to lend on new purchases, or they may require larger down payments. Even if all goes well now, you may have a difficult time when you try to sell or refinance.
If you do find your dream home in a community that seems a bit abandoned, try talking to a resident or two when you tour the apartment to see if there are any red flags.
Finally, keep these questions in mind. Do you like the size of the apartment? Is it in the right neighborhood? Is the building properly maintained and are the amenities to your liking? Can you afford the mortgage, including homeowner’s association fees? These considerations will point you in the right direction to find a condo that has everything you want.