A condominium or condo can provide you with the convenience of apartment living and the reality of home ownership. Over the past three decades, condo living has exploded as people seek to downsize or simply to buy into the American dream. Buying a condo has its own challenges, including several that may surprise you.
Home Owners Association
All condos are governed by a home owners association (HOA). These governing bodies ensure that the people who live in the residence can afford to buy and keep up their homes. They also oversee the day-to-day operation of the facility.
In some locales an HOA can be overbearing, limiting what you can pin to your door or display on your balcony. Even inside of your home, you may be limited to what updates you make as those changes can affect the value of the adjoining apartments.
Expect to pay monthly HOA dues. These dues cover common area maintenance, pool or other recreational facilities and long term upkeep. Most fees begin just below $100, but can increase to four or five times that amount. That’s a cost that condo shoppers must consider, one that may tax their budget.
Your Mortgage Costs
If you will be moving to a condo, your mortgage costs may come in higher. Banks routinely reserve the best financing deals for houses. You can ease that cost by putting more money down to secure a lower-rate home loan.
You should know that your banker will look very closely at the condo’s occupancy rate. If the occupancy rate is on the lower side, a lender may hesitate to offer you a loan. That’s because a condominium with too many vacancies may be subject to crime and poor upkeep. A stable condominium project offers increased appeal to your banker.
Another consideration is that your HOA fees may vary depending on occupancy as well. With fewer people living in the project, the remaining residents will have to shoulder the maintenance burden. For instance, what should be a $125 per month payment could cost you twice that amount if there are multiple vacancies.
The Convenience Factor
Condo buyers typically shop for units that are convenient to them. This is an important consideration for you, but is something to keep in mind if you should need to sell your property at some point too.
Indeed, condo buyers are a selective and will look beyond the unit project itself. Proximity to mass transportation, stores, schools, businesses and leisure activities are important. Even a few blocks walk can make a big difference in some large cities to prospective buyers.
A Tight Space
No matter how you look at it, your condo will offer you only a certain amount of square footage with no expansion possibilities. This may not be an issue for you if you already rent, but if you are downsizing from a 2,500 square foot Georgian colonial to a 750 square foot condo, you have much purging to do.
Some condos offer dedicated storage areas to supplement the apartments. Here, you would pay an extra fee to gain 100 to 300 square feet of storage space. However, that storage space may defeat the purpose of downsizing — you will pay for space holding items you may no longer need explains Allied Moving Services.
With so much to consider, your condo shopping quest should be carefully planned and deliberatively undertaken. Work with a knowledgeable real estate agent, one who specializes in condominium properties.
View several places, compare the amenities and make sure you understand the advantages and disadvantages of each one. Compare HOA fees and understand what long term costs may affect those fees — a new roof, replacing the central HVAC system and updating an old pool may play in at some point down the line.