Condos are an excellent alternative to apartment living when you are ready to put renting in the rearview mirror and purchase your own home. For many, the idea of a turn-key lifestyle with minimal upkeep is a huge plus over buying a single-family dwelling that may require more work.
It’s important to understand precisely what you are buying, so I wanted to start by going over the definition of a condo. They are a single residential unit that an individual owns inside of a multi-family building. So, while you are the owner of your condo’s interior, you are not the owner of the exterior space. From sharing walls with neighbors to paying HOA dues, here are some things to consider when buying a condo.
Condo owners pay dues on a monthly or quarterly basis to a homeowners association (HOA). They keep this money in reserve for the upkeep of the shared spaces like courtyards, pools, gyms, fire features, roofs, etc. Keep in mind that if your condo requires all residents to belong to the HOA, there can be strings attached. For instance, that bright green front door you saw on HGTV likely won’t be an option in a condo complex with an HOA.
Association Bylaws & CC&R’s
HOA’s have CC&R’s (covenants, conditions, and restrictions) along with bylaws that govern the community rules. It’s a good idea to look over a year’s worth of the HOA meeting minutes and any special meetings that were held as well. You should also review the reserve study/maintenance schedule and the association’s projected financials for 5-10 years. Ask questions like whether or not the HOA will cover future improvements.
Like apartment living, some condo CC&R’s restrict the size, weight, and/or breed of pets. And some ban them altogether. So, if having a pet is essential to you, be sure to inquire about pet restrictions before you get too far down a path to ownership.
Not all condos in the same complex are created equal, which is especially true for resale value. Orientation plays a considerable role in resale value, so look for units with good natural light, exceptional views and outdoor living spaces, laundry in the unit or the potential to add it, additional storage spaces, and perhaps corner units that only share one wall. Condos with two or more bedrooms will come with two parking spaces (which should be side by side), can also be important for rental potential (more on that in a bit). Amenities like a pool and spa are also great for resale value.
Condition of Public Areas
As you’re touring condo complexes, take a moment away from the unit and be sure to assess the condition of the public areas. Look at the landscaping and how it is maintained, focus on exterior features like how well the painting is kept up, check the elevators and hallways for cleanliness, nose around the pool, spa and/or gym, etc. Remember: in the event that you buy, your HOA dues will be contributing to these expenses.
Board Members & Neighbors
Living in close quarters with numerous people is not for everyone. This can be even more true when you factor in an HOA where all of your neighbors are making financial decisions on behalf of the community. If possible, try to speak with an HOA board member or a current resident to see how previous projects were handled.
Condo financing is not exactly the same as financing for a single-family dwelling. Some lenders will charge a higher interest rate for condos, and most will want to see HOA information ahead of time like the annual budget, reserves, and sometimes the CC&R’s. Just be sure to keep this in mind and speak with your lender and real estate agent to see if there are additional documents you need to help keep the financing component moving along.
Rules About Renting
Owning a condo and renting it out is a great way to offset your investment cost and provide some monthly cash flow. However, some HOAs have strict rules about renting. Some do not allow them at all, while others cap the overall number of condos in the complex that can be rented out. If being a landlord is your objective, you will want to inquire about this upfront.
As you can see, there are a lot of considerations when you’re thinking of purchasing a condo. They can be an excellent option for many people so long as you complete your due diligence ahead of time.
I’m a local real estate professional who has decades of experience in the Pasadena area. I am available to assist you in buying or selling a home, so please contact me if you would like to schedule a time to discuss your needs. Stay healthy and safe!