Condominiums: Are They Right For You?
Condominiums can offer the lifestyle you’ve been dreaming of, the location you’ve fantasized over, or just may appear to be the best bang for your buck. You may also find yourself fearful of condominiums; special assessments, common areas, amenities, and condominium associations — oh my! Whether you’re looking to downsize, renovate and flip, or you’re making the leap into your very first home, the tips below will help answer whether condominium living is right for you and the pitfalls to beware of along the way.
But what is a condominium? It can get confusing real quick but to simplify — a condominium is a type of real estate divided into several units that are each separately owned, surrounded by common areas jointly owned. Most condominiums appear as apartment buildings but condominium communities can take many different forms including single-family homes in which the exterior is still jointly owned and maintained by the condo association.
Let’s start with the benefits of condominium living
Typically purchasing a condominium is less expensive than purchasing a single-family home when compared from similar locations and upgrades. However, you’ll want to consider condominium dues and all that is included within those dues to see if you truly are getting the best bang for your buck.
Sometimes purchasing a condominium within a highly desired location is your only option. It’s safe to say if you’re looking around downtown Manhattan, you’re not going to find any single-family homes, but even in markets like my own, condominiums can allow you the option to get into an otherwise difficult location. In my market, some high-rise condominiums have units with direct water views that begin around $180,000, however driving one-tenth of a mile down the road to the single-family homes, you’ll see waterfront properties beginning around $900,000. Want ease of access for work, outdoor activities, nightlife, and dining, but without the heavy price that may be found in a single-family home? Condominiums may be the key to get you where you want to be.
The variation of amenities from condominium to condominium makes each condo unique. Most condominiums typically have some sort of ground maintenance to maintain the common areas around the association but beyond that, the possibilities are truly endless. I’ve sold units that have included rooftop recreation areas, 24-hour guards on-site, gated security, pools, gyms, spas, libraries, and one building even had a craftsman room filled with carpentry tools. You’ll have to ask yourself if you’re going to make good use of the amenities within the condominium you’re considering because those amenities will certainly be priced within your dues.
These are just a few of the potential benefits to purchasing a condominium. Remember our definition of condominiums? You own within your walls and are still free to upgrade and customize as long as you’re fulfilling all the requirements of the city and getting the proper permits. Time for new siding? Time for a new roof? When it is time to make these purchases, it can get expensive. Fortunately, with condominiums, you’ll be splitting these costs amongst all units. Sharing these homeowner burdens may help alleviate concerns, especially in first time homebuyers.
Let’s consider some of the cons to purchasing a condominium
Dues often calculated by the size of your unit and are budgeted to cover many items including your building’s master insurance policy, landscaping, varying utilities covered, and upkeep required for all the amenities offered. Needless to say, condominium dues can really fluctuate from even neighboring condominiums. These condominium dues will surely increase over time as well so it’s important to consider if you will make the most of what is offered by the condominium you’re considering and that you have budgeted long term for potential increases in the dues.
Unfortunately sometimes just paying your condo fee may not be your only financial obligation. Mismanagement or sudden failure of a major item may force the condo association to levy an assessment on all owners. Special assessments can equal sometimes equal big money in the ten to 20 thousand dollar range and may need to be immediately paid or have an option to roll it into your monthly condominium dues over a fixed amount of time. An upcoming assessment announced by the condominium’s board can have a big impact on your ability to negotiate the sale of your condo as well as the overall price.
Historically, condominiums are the hardest hit by a market downturn and the last to bounce back, this can be largely due to the upfront costs of monthly condominium dues leaving prospective buyers hesitant. A little “rule of thumb” when it comes to monthly payments is around every $50 per month equals a total of $10,000. I mention this because the increase of condominium dues will partially eat into rising market values. That is why condominium’s typically lag behind the rest of the market though surprisingly according to NAR detached homes have increased over the last year by 4.2% while condominiums increased by 4.1% only falling .1% behind detached homes. This is why most people avoid condominiums when it comes to investment properties or expecting big returns on resale over a short period of time.
Condominiums are governed by bylaws. These are set forth in a legally binding contract that regulates everything from parking and pets to potentially the color of your blinds. It’s important to read the covenants, restrictions, and bylaws of the condo carefully to make sure you’re comfortable with the rules set in place.
Since you’re sharing common walls and floors, you’re guaranteed to experience less privacy than what you could expect from a single-family home. While this could also be seen as a positive because typically there is a special level of community within condominiums, but if you enjoy absolute privacy then a condo may not be the right fit for you. The way the building was constructed can be worth noting as well. A concrete building will abate noise much more effectively than a condominium framed with wood.
I’ve been fortunate enough to help quite a few homeowners find their ideal condominium. It’s a decision you don’t want to rush and it’s important to note that every condominium varies and while one may not be a good fit, the perfect fit may be the building just next door.