When on the hunt for a new home you’ll have many different property types to choose from. One of these is the condominium or condo for short. Unlike regular single-family homes, condos are individually sold units within a communal living complex. In one sense, it’s an apartment, but one with several important differences. These property types offer a lot of advantages, but they may not suit everyone. Before deciding on buying one it’s important to understand what you’re getting yourself into. Below we cover all that and more.
What Is a Condo?
As mentioned, condos are individually owned units in a multi-unit housing complex. While you will have private ownership of your unit, you’ll also share collective ownership of the common areas and shared amenities with other condo owners. They come in many different tiers with the more upmarket ones having tennis courts, pools, gyms and other luxury amenities. Most of them tend to be found in built-up areas with high property prices. Because of the high property costs and limited spaces, it makes more sense for buyers to pool their recourses together and own a communal condo development.
In some ways, joining a condo is a bit like joining a business. Each person has full ownership of their unit while contributing to the upkeep of the building and its shared amenities. Due to this arrangement, they qualify as a Homeowner’s Association (HOA). Like any HOA, there will be a Board of directors, elected by residents, that will oversee and implement building rules. Anyone looking at buying a condo will want to take a close look at these rules before going any further.
Buying a Condo: Important Things to Know
Shopping for a condo is much the same as shopping for a single-family home. Have an idea of what you’re looking for, determine your budget and start searching. Enlisting the services of a qualified Exclusive Buyer Agent will save on time and most likely ensure a better deal. After touring a few properties and compiling a favorites list, it’s time to start looking a bit closer. As mentioned, condos are part of a homeowner’s association. As such you need to know what the rules are, and how efficient the management is. Before making any offer, request all necessary documents such as the associations budget, their rules and regulations, and any pertaining to the management of the complex.
Key questions to ask yourself are:
- How does management deal with owner requests and complaints?
- Do they have any strict rules or guidelines that would have an impact on you?
- What is the HoA fee and is it paid monthly or annually?
- What are the penalties for breaking any rules or regulations?
- Do they have any outstanding debts?
- How big is their reserve fund?
- Do they have any big upcoming projects?
How funds are allocated in their budget will be of great importance. You want to be sure that they’re putting enough money into repairs and maintenance, as well as leaving aside a fair portion as a reserve fund. You can ask your Exclusive Buyer Agent whether these numbers look right for this type of building and location. Consider it a major red flag if the association refuses to share their budget with you. You’ll also want to find out if there are any plans for major repairs or improvements in the near future. Ask how they plan to fund these. Major projects are usually paid for through a “special assessment,” which is an extra fee added onto each resident’s regular association fees.
Condo associations have what’s called a master insurance policy, which differs from homeowner’s insurance. What exactly this involves will vary from one building to another, so you’ll want to review their policy thoroughly. The last thing you’ll want is to end up with repair costs that the association’s insurance doesn’t cover.
Advantages of Buying a Condo
There’s definitely an appeal to buying a condo. You get to live in a beautiful complex that comes with luxury amenities whose upkeep you can leave to the association. Chances are you’ll also get along well with your neighbors as they were probably attracted to the condo by the same things you were. Another plus is that condos tend to have slower price appreciation than single-family homes. This makes them a more affordable option, especially in areas that are seeing high price appreciation. Then, of course, there’s the fact that you’ll own the condo unit, along with the mortgage tax deductions that come with it.
- More affordable (usually) than single-family homes
- Access to luxury shared amenities
- Upkeep of shared amenities is not your responsibility
- Close to neighbors who all have a stake in the building
Disadvantages of Buying a Condo
Condos have slow appreciation which makes them more affordable, but this could also be a con depending on how you plan to use it. The association rules can also place limits on what you can do at certain times and can feel restrictive. The communal aspect can also be an issue if you want more privacy. Then there are the association fees that you’ll be responsible for paying either monthly or annually. While owning a condo will mean tax deductions on your mortgage, it will also mean having to pay property taxes.
- Association fees
- Rules and regulations that can sometimes be strict
- Slower appreciation which makes them less viable as an investment
- Less privacy as you’ll be sharing common areas and amenities with other residents
Condos can offer a lot, but you need to carefully consider each one before deciding. Each one will be a little different in how it’s run and the rules they have in place. Whether a condo is right for you or not depends on where you are in life and what you’re looking for. Talk with a buyer’s agent to learn about the condos in your interested area and see if they’re the right fit for you.