An introduction to buying a condominium
When looking to buy a home, there are a lot of choices available. One of them is a condominium, a multiple unit property that is divided and sold in individual units. Compared to a single-family home, condominium ownership includes partial ownership of shared “common property”. This aspect of a condo presents unique challenges for buyers.
If you are thinking of buying a condo, read on to find out a little more about this type of property and what it entails.
Key points to remember
- Condominiums come in many forms – townhouses, apartments, and even tiny homes within a larger development or neighborhood.
- An affordable condominium is a popular choice for a vacation home in seaside locations such as Florida, Bermuda, or Hawaii, and high-value locations such as New York and Los Angeles.
- Before purchasing a condo, it is advisable to ask for and read all the rules of the condominium complex.
- Many condominiums offer amenities such as swimming pools, lodges, tennis courts, and golf courses.
- In 2020, the condo market took a hit. The economic crisis had an impact on the desire to share amenities, and living nearby in apartments or townhouses was less attractive to buyers.
How does the co-ownership work?
What is a co-ownership?
In a condominium (commonly known as a condo), certain parts, such as your home, are owned by individuals. Others, like the common areas, belong collectively to all the owners of the condominium. A less technical way of looking at a condo is like an apartment that you own.
In practice, condos often take the form of an apartment or similar shared complex, such as townhouses. Yet, theoretically, a condo could physically be any shared building.
Condos are all the rage in places with high property values - vacation hot spots and urban settings are places where you can expect to find plenty of them. This is mainly because buying a single family home can be prohibitively expensive in cities and towns where additional building space can be scarce. As such, condos can open up homeownership to new groups of people.
Looking for the right condo
Finding a condo involves the same process as buying a single family home. If you have a general idea of what interests you, going to a real estate agent can be a great way to find properties that you might not be able to find on your own.
If you are more of a handyman, you can search the websites and real estate listings for condos in the area that interests you. If you have a building or complex in mind, many offer on-site sales offices. , where you can learn more about the condo and maybe even see a demo suite.
Beyond the condo sales contract
It is not just the sales contract that you have to think about when buying a condo. There is also an agreement or statement that dictates how the condominium operates and is governed. Before purchasing your condo, you must request and read the documents that apply to the management of the complex.
Here’s what to note: What are the burning issues with this resort? What is the size of the condominium reserve fund? How does management deal with landlord inquiries and complaints? Does the condo board impose strict rules and guidelines on owners that would make you miserable?
It is essential to understand if the condominium you are considering is well managed and if the rules and restrictions would allow you to live the lifestyle you are looking for in a condo community. It is also essential to determine if the building or condominium complex is experiencing any issues that could affect the value of your share of the property in the future.
If you’re ready to own a home, but can’t afford an entire house, a condominium could be a way to enter the real estate market.
Condo vs apartment or house
There are many reasons why a condo may be better suited than an apartment or a detached house, and money is undoubtedly one of them. According to the Real Estate Journal, condominium prices tend to appreciate more slowly than single-family homes, making them a more affordable choice in markets where prices are on the rise. And compared to renting an apartment, since you own your condo, you can take advantage of tax deductions like interest on your mortgage.
Of course, it’s not all about the money. Condos also offer attractive living choices for many potential buyers. They are particularly popular with retirees who wish to be able to socialize or take advantage of the services offered by communities that cater specifically to the elderly.
Living in a condominium can also free you from some of the usual property chores, such as yard and exterior maintenance. They may also have desirable common amenities, such as swimming pools, fitness rooms, or tennis courts.
Condos as vacation homes
Finally, co-ownership can make owning a second home more affordable. In the United States, condos have become popular as a more reasonable way to buy a little slice of heaven in places like Florida and Hawaii. If you want to relax at the beach but cringe at the thought of buying an expensive home in full sun, condos offer a slightly cheaper alternative.
A condo also has the benefit of having someone else guarding your property when you are back at work and miles from the beach. Depending on the rules and location, you can also help pay for that vacation condo by renting it out when you’re not there.
The disadvantages of owning a condo
There are potential drawbacks to owning a condo. For example, even if you don’t use the amenities in your condo, you still have to pay for them. You also pay for the maintenance of grounds and common areas in the complex. Condominiums have fees and HOA ratings to cover these costs, and often these fees increase each year. Over time, this could impact your budget in the long run.
If you’re the type of person who doesn’t like following a specific set of rules for yourself or your guests, a condo complex with a long list of rules for its owners could be frustrating over time.
Finally, a condo is not always as easy to sell as a house, especially if yours has higher than average HOA fees or if your board of directors has strict rules for its condo community. For example, if your resort doesn’t allow young children, you’re losing a subset of potential buyers.
FAQs on buying a condo
What should I know before buying a condo?
When buying a condo as an investment, vacation home, or year-round residence, it’s important to read all of the condo’s rules through the agreement. Make sure you understand how the condominium management team works and how the condominium complex is managed.
Ask about HOA fees as well, because when you buy a condo, you have to pay for community amenities (and their upkeep) such as a swimming pool, clubhouse, or tennis courts. HOA fees cover reserve funds and regular maintenance and repairs, and you should be aware of separate assessed fees that might arise later.
Are condos good for first-time buyers?
Condominiums can be a good way for first-time buyers to enter the housing market. Condominium prices tend to be lower than single-family homes, and just like owning a home, condo owners enjoy tax benefits. A first-time buyer can also benefit from condominium amenities that would not be affordable in a traditional single-family home.
Are condos a good investment?
They can be, but there are several factors to consider when buying a condo as an investment. First, where is the condo located? Is it in a popular vacation spot or in a city where condos are in demand? Does the condo come with great amenities and low fees?
A condo in a highly desirable location with quality amenities will likely keep its value and appreciate over time. Vacation condos can be great vehicles for making money, especially if the amount of rent you charge covers your mortgage and HOA costs. It is important to note that HOA fees must be paid and may increase each year. These fees cover the cost of maintaining the common areas of the complex and pay for maintenance such as landscaping and repairs. You should pay attention to these costs and factor them into your budget before calculating the potential return on your investment.
What is a good credit score for buying a condo?
If you want to buy a condo or a house with a conventional mortgage, you will need a credit score of around 620. If you plan to use an FHA loan to purchase your condo, your score should be d ‘at least 580.
Do condos appreciate value?
Historically, condos have appreciated or retained their value. In 2020, the economic crisis blocked the condo market due to the increase in inventory (more people sold their condos). Buyers were not as drawn to the common amenities of condominiums and nearby living quarters. In fact, in 2020, the median selling price of condos was lower than single-family homes as more buyers sought single-family homes with more space. However, condominiums located in desirable locations should continue to represent a good opportunity for investors.
The bottom line
If you’re thinking about buying real estate, whether as an investor, vacationer, or year-round resident, condos are something that should be on the radar. This is especially true if you are looking for an area where real estate is expensive. Condos are not inherently better or worse than any other type of residence, but depending on your situation, a condo might be the right choice for you as a home buyer.