What Should You Know Before Buying a Condo?

Make a smart first home purchase: invest in a condo! Here are some reasons a condo may fit your lifestyle!

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What Should You Know Before Buying a Condo?

Posted by Gary Ashton on Wednesday, March 13th, 2024 at 8:29am.

Reasons to buy a condo when looking for a new home

Are you in the market for a condo? Before diving in, there’s much to consider—association rules, fees, and the right financing, just to start. This comprehensive guide cuts through the complexity, equipping you with what to know to start searching for condos, from assessing lifestyle fit to understanding the financials, ensuring your condo purchase is a step towards a rewarding investment.

Main Points

  • Condo living appeals to those seeking a low-maintenance lifestyle with built-in social communities, but it requires adjusting to shared living spaces and involves participation in a condo association with its own rules and responsibilities.

  • Engaging a specialized real estate agent in the condo-buying process provides expert insights and access to resources that streamline finding and acquiring a suitable property while ensuring that market and legal nuances are thoroughly navigated.

  • Financial considerations are paramount when purchasing a condo, including understanding monthly association fees and reserve fund health, as well as reviewing financial documents, regulations, and potential special assessments that impact long-term affordability and investment potential.

6 Reasons Buying a Condo Is Worth It

Better Urban Living Experiences

Like an urban apartment, condos offer their owners more central locations that homes can't always provide. Living in a centrally located condo, there's an opportunity to walk or utilize inexpensive mass transit options for most daily transportation needs, including work, school, errands, and recreational activities. This helps to keep car parking, maintenance, and other costs minimal. 

Additional Perks and Amenities

Working out at the local gym requires the single-family homeowner to drive to the nearest gym and pay a membership fee. Most condos, however, offer the same amenities as apartments, and condo owners can access them without ever leaving their homes. Condo owners In the right locations can work out, swim, and enjoy other amenities right inside their own development at no additional charge. In addition, other features and upgrades may be available. 

Flexibility for Frequent Travelers

Homeowners who spend time traveling must spend time and money to find and pay trustworthy help to keep lawns cut, and snow shoveled when they are gone for days, weeks, or months at a time. For the busy condo owner, traveling only requires packing a suitcase and locking the door when leaving, while the maintenance staff takes care of the lawn and other maintenance needs.

Passing on Exterior Maintenance

Owning a single-family home means taking responsibility for home maintenance, even high-dollar jobs like house painting or putting on a new roof. Condo owners pay a pre-determined association fee each month, and that money is then used to make any repairs or maintenance needed to the outer structure of the condo and the public areas in the development. 

Enhanced Security

Unlike a single-family home where the owner has sole responsibility for security, most condos offer some type of enhanced security. In many cases, this security includes an on-site security presence, secure access gates at entry and exit points, enhanced lighting, and the use of security cameras.

More Affordable Purchase Price

In many areas of the country, similarly sized condos and single-family homes can be priced several thousand dollars apart. Because condos are built using less expensive common walls and roofs and grouped together for efficiency, they are usually less expensive to build per unit compared to a similar single-family home on a lot. However, the benefit of buying a condo instead of renting is that the owner still gets to build equity. 

Buyers who are considering the purchase of a condo should remember, however, that condo living requires paying an association fee each month. This fee is collected from all the residents who make up the condo community and is used to cover the costs of exterior maintenance, upkeep, and for the use of any special features, such as pools, spas, and gyms.

Understanding Condo Associations

Stepping into the world of condos means getting acquainted with condo associations. But what exactly are they responsible for? The condo association’s responsibilities include:

  • Setting the annual budget

  • Deciding on special assessments

  • Maintaining property values

  • Ensuring the safety and convenience of residents.

The decision-making within a condo association follows a structured process. It involves condo board decisions that require majority votes and may even include association-wide votes conducted in person or by proxy. The election of the condo association’s board members is governed by state statutes and association bylaws, and requires a minimum percentage of eligible voters for validity. The association enforces rules and regulations, with the authority to impose fines for violations, while ensuring all actions comply with federal and state laws.

Condo Association Fees

Understanding condo association fees, also known as hoa fees, is fundamental when considering a condo purchase. These fees are a required monthly charge for living in a condominium. They are typically used to maintain common areas and shared amenities. The amount of these fees can vary widely, with the average cost in the U.S. ranging from several hundred to over $1,000 per month. The fees are influenced by factors such as:

  • Location

  • Included amenities

  • Insurance costs

  • Overall maintenance requirements

Why are these fees so crucial? Because they influence the affordability and investment potential of a condo. They impact your rental income and the overall costs beyond the mortgage. Also, the delinquency rates on association dues can signal the community’s financial health and the risk of fee increases or special assessments. Most importantly, these funds go towards the maintenance of common elements, so everyone can enjoy a top-tier living experience. 

Reserve Fund Health

Reserve funds are essential to ensure the community’s financial health and to prepare for future repair costs. A healthy reserve fund reduces the risk of unexpected financial burdens on condo owners.

However, inadequate reserve funds can pose significant challenges. They can result in special assessments for repairs or major replacements, leading to increased condo fees or decreased property values. Special assessments may indicate a pattern of financial mismanagement within the association and can present an unpredictable financial burden to homeowners.

Rules and Regulations

Condo associations also establish and enforce rules and regulations for the community. Reviewing these rules is essential for understanding any restrictions or requirements that may affect your ownership experience.

For instance, condo communities often have rules restricting:

  • pet ownership or dictating the type or number of pets allowed

  • renovation projects and the use of shared facilities

  • noise control

  • specifics on garbage disposal

  • requirements for carrying out renovations within individual units

Condo associations may also regulate property use and rental arrangements, which can influence the unit’s potential as an investment opportunity. Non-compliance with these rules can result in penalties such as fines, and making significant alterations to your unit typically requires the association board’s approval.

Are Condos a Good Investment?

What if you’re looking at condos not just as a living arrangement but also as an investment opportunity? In that case, you need to understand if subletting is allowed by the condo association and evaluate the rental market potential in the area for sustained income.

A condo’s value can be significantly influenced by its location, local community amenities, and broader market conditions. Investing in condos successfully entails setting clear investment goals, targeting markets or renter demographics that will find the low maintenance aspect of condos appealing, and considering properties in high-demand locations like city centers for optimal cash flow.

When considering condos as long-term investments, it’s vital to factor in the potential for appreciation or depreciation over time and the risks associated with special assessments, which can affect the overall profitability.

Is Buying a Condo Right For You?

Buying a condo involves careful consideration of various factors—from evaluating your lifestyle, understanding the condo association and its fees, and working with a specialized real estate agent to conducting due diligence through inspections and reviewing documents. It’s essential to understand the pros and cons of condo living, consider the investment potential, and evaluate the neighborhood. With the right knowledge and preparation, you can make an informed decision and enjoy a glamorous urban lifestyle in the city's best condos!

Frequently Asked Questions

What are the steps to buying a condo?

When buying a condo, make sure to get pre-approved for financing, find a real estate agent specializing in condominiums, understand the rental and pet rules, and check for special assessments or upcoming projects in the condo documents. This will ensure a comprehensive buying process.

How much money should you have for a condo?

You should aim to have between 3% to 20% of the purchase price for a down payment and an additional 2% to 5% of the loan amount for closing costs. These amounts can vary based on your financing options and future plans.

Can you negotiate condo price?

Yes, you can negotiate the price of a condo based on factors such as market conditions, competition from other buyers, and the seller's willingness to lower the price.

What are the benefits of condo living?

Condo living offers a low-maintenance lifestyle, a built-in social network, and the convenience of being close to amenities and city centers, making it an attractive option for many individuals.

 

Gary Ashton

The Ashton Real Estate Group of RE/MAX Advantage

The #1 RE/MAX team in the World!

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