How to Buy a Condo in 2022
Are you looking forward to home ownership? In this article, we’ll guide you through selecting the right condo.
A condominium, more famously known as a condo, is a single unit within a multi-family housing unit. It could be an apartment building, townhome, or free-standing home. Condos often have shared areas like pools, backyards, gyms, barbecues, and other public spaces.
Condos are good for first-time buyers, not just because of their affordability, but because they can serve as a long-term investment (if the condo association permits rentals), where you can place it on lease yearly or as an Airbnb for a shorter-term arrangement.
A condo could also be a great choice for a vacation home in high-value areas like New York or beach locations like Hawaii.
Condo Owners and the Condo Association
Whether you’re using your condo privately or as an investment property, you need to know the details of your purchase. As a condo owner, you own only your respective unit, regardless of how big the property is.
Shared areas are usually managed by a condo association referred to as the homeowner’s association (HOA), consisting of some, if not all, persons living in the building.
It plays the role of a supervisory board and employs the services of a property management company responsible for communicating with residents and maintaining the amenities attached to the structure.
Maintenance of shared amenities is especially favorable to those who prefer a hands-off approach to home ownership. However, this attracts a monthly HOA fee subject to an increment every year.
Difference between a Condo and a House
With the persistent rise of housing properties, a condo is relatively more affordable than single-unit houses. However, a condo has less interior and exterior space, meaning you probably won’t get a backyard with a condo. Meanwhile, a single-unit home will have a much larger space.
The interest rate attached to the mortgage process for a condo is higher than the conventional mortgage for a single-unit home. Monthly payments for condo mortgage is much more than that of single-unit homes, especially if you do not want to use your monthly mortgage payments for private mortgage insurance.
Besides the cost, condos are also a way of socializing with people, as you have several persons sharing a structure with you, unlike a single family home where you have a larger space.
What to Consider Before Buying a Condo
Get a reliable real estate agent.
A real estate agent with a reliable track record in condos is your best option when deciding to buy a condo. This agent must know the condo developments in your preferred area and the possible issues they might have.
The right agent should be able to review documents of the condo community, infrastructural problems, and community finance issues. A good agent will know which property has the highest resale value, especially if you don’t plan on living in the condo forever.
As invaluable as an agent is, you need to visit areas of interest to communicate with the residents and observe the environment generally for a deeper insight.
Know your lifestyle.
Before buying a condo, you must consider certain things about your lifestyle. Are you comfortable sharing your space with people? Or do you like to have a much larger space to yourself alone?
If you have busy schedules or hate activities such as trimming hedges, mowing lawns, and power spraying the driveway, and are comfortable with a monthly payment of about $4,000, then perhaps condo living is for you.
Consider only federal housing association (FHA) approved condos.
You can take a step further and search the FHA website. It contains a comprehensive list of approved condos.
It is best to engage a mortgage professional with adequate experience with condos to help with your purchase because while applying for an FHA loan, your finances and the condo development are considered.
Getting a loan is difficult if FHA has not approved the condo, and you also need a good credit score.
Don’t hold back on requesting amenities.
Just as you’re entitled to the ownership of the condo unit you’re purchasing, you also share in the ownership of basic amenities. You have the right to decide the amenities and maintenance services you want, whether a gym, an outdoor grill, or a playground.
These amenities, even when not used, can significantly increase the resale value of your condo, giving you a higher sales price.
Investigate the property management company.
It is important to know and research the management company responsible for the day-to-day maintenance of the property. While hunting for a condo, ask about who handles structural maintenance and resident requests or complaints.
Researching the project management company, especially other projects they manage will give an insight into their commitment and abilities.
Lack of maintenance and poor resolve of resident requests or complaints can be unbearable, and this may have a huge impact on the resale value of your condo. You’ll also find yourself having to pay higher HOA fees regularly.
Review HOA fees and rules.
You will be required to pay monthly HOA fees for the day-to-day maintenance of the areas. This fee is separate from your monthly mortgage payment and is subject to increment. It is good to know beforehand the amount paid and the rising pattern to know how suitable it will be for your property taxes.
Find out the rules and regulations of the community ahead of time to see if they are compatible with your lifestyle. It is better known beforehand to avoid areas with overbearing rules and regulations.
Check for special one-time assessments.
Sometimes, extra charges are imposed when a significant project wants to be instituted by the HOA board. These charges are only for a while. It is necessary to be aware of this and how frequently these projects come up, as this will affect your budget.
It is good to request a copy of the HOA’s record, run it through with your accountant and realtor, and ensure you are okay with possible expenses from any special one-time assessment that may come up.
Pros of buying a condo
Affordability: A condo is generally cheaper than a single-family home.
Opportunity to socialize: It presents an opportunity for socialization, especially for retirees and those who do not mind sharing personal space.
Access to shared amenities: Depending on what’s provided, you can access all shared areas, including pools, clubhouses, parks, etc.
Lower maintenance costs: You are solely responsible for repairs or an upgrade you’ll like to institute in a single-family home. In condos, however, these costs are handled by the contributions of each condo owner.
Cons of buying a condo
Reduced privacy: If you can’t stand noise, living in a condo might not be for you, as you’ll be sharing walls, lobbies, and other areas with people, so this might pose an issue.
Parking problems: Lack of assigned parking space can be an issue, as you will have to park farther away and have a long walk to and from your doorstep.
Storage issues: Especially a problem when space set aside for the residents for storage does not match the number of persons living in the building.
High investment risk: Since you own the structure with others, you can only hope for as much compliance as possible from fellow condo owners.
Non-compliance, especially dues payments for catering to daily structural maintenance, may negatively affect the quality of your investment. The resulting neglect can affect the structure and amenities, causing a decline in property value.
Rules and fees: HOA fees are subject to change and tend to increase over time. It can be very high and range from hundreds to thousands of dollars, especially in urban settings. It is a common complaint among residents in a shared apartment.
Also, the rules might be too overbearing. These rules can range from no noise to restriction of movement around the condo and how many pets one can own.
Pros of buying a condo
- Community life
- Access to amenities
- Reduced cost of maintenance
Cons of Buying a condo
- Not much privacy
- Parking and storage issues
- Risk of investment
- Rules and fees
Is it a good investment to buy a condo?
It depends. You’ll need to compare the cost of the condo to a single-family home and understand your condo association’s rules on leases.
Is it reasonable to buy a condo as a first-timer?
Perhaps. Although condos are usually cheaper than houses, their monthly costs and mortgage rates are higher.
Does the value of condos appreciate?
Yes, but at a lower rate than houses.
How can I find the nearest condo complex?
The first place to check is the FHA’s approved list. Then you can check with a local realtor with condo experience.
How can I finance a condo?
If you’re not buying it outright with cash, including conventional, FHA, VA, and USDA loans.
Would I need to get condo insurance?
Yes. Condo insurance will cover what your association’s policy will not, such as damages to your belongings in case of a fire.
What must I do before buying a condo?
Research! Get all the information on the condo association, rules, and fees. Also, take a tour of the area and check out the amenities.
Buying a condo is one good way to invest in the real estate market. And if you’re used to apartment living, it’s also an excellent option for personal use, especially in areas with expensive real estate.
Condos aren’t generally better than other residences, but they can be the best choice for you, depending on your situation.