Thinking of buying a condo? It’s a great type of real estate to buy, whether you’re planning to live there yourself or are thinking of renting it out as an investment property.
But like any other type of real estate purchase, you’ll want to make sure that the investment you make is a sound one. Buying a condo is very similar to buying a traditional home, but there are some differences.
Here are a few important things to look for when shopping for a condo.
No matter what type of real estate you’re buying, location is always the most important factor to consider. And buying a condo is no exception. Whether you’re planning to stay put for the long haul or might be open to selling in the near future, the location will play a key role in your enjoyment of the unit and your ability to sell when the time comes.
2. Condo Association
The health and integrity of the condo association is an absolutely crucial component to consider before buying a condo. Ideally, the HOA will be based on sound regulations, will appoint trustworthy and honest board members, and will keep the building and grounds well maintained.
These associations hold a ton of power, and as such, they can directly influence how you enjoy your home. Make sure to find out what their rules are and whether the HOA is dedicated to keeping owners happy and property values up.
3. Reserve Funds
A reserve fund is a financial account that is contributed to by owners. It’s meant to be used to cover the cost of emergency repairs and large expenditures that don’t usually need to be dealt with on a regular basis, such as a new roof or new electrical system.
Ideally, the reserve fund should have adequate funds in it to be able to cover expected costs at any time in the near future. But if there’s not enough in the pot, all the owners – including you – will have to cough up the money until there’s enough to pay for whatever surprise expense comes up.
4. Condo Fees (and What They Cover)
One of the biggest differences between buying a freehold house and a condo is the maintenance fees. If you buy in an HOA, there will be monthly fees to pay. These fees will vary from one complex to another and are usually based on the condo’s location as well as the type of amenities that are offered.
Find out what these fees are, and what they cover. If there are lots of amenities in the building that you don’t need and will never use, there’s no sense in paying for them. Instead, look for a building that has just what you need so you only pay for what you use.
5. FHA Approval
If you’re planning to take out an FHA loan to finance your purchase, the condo must have FHA approval. If not, you’ll need another type of mortgage to secure the place. This can also be a problem come resale time. You might be eliminating a good chunk of potential buyers if the condo is not FHA approved.
6. Rental Permission
If you’re planning to use the condo as an investment property and rent it out, find out if there are any restrictions on renting in the building. If the rules of the condo association don’t allow rentals in the building, then you might want to search elsewhere.
7. Percentage of Rentals
If the condo allows rentals, you’ll want to know what the share of renters in the building is, regardless of whether you’re buying to live in the unit or to rent it out.
If your plan is to make a home for yourself, knowing the percentage of renters in the building could determine your quality of life. Renters are not known to take care of their properties as well as owners, though there are certainly exceptions to this rule.
If the building has a particularly high share of renters, that could influence how the building is kept, which could also influence your enjoyment of your home as well as its resale value.
If you’re planning to rent it out, knowing what the percentage of renters is will give you a sense of what your competition is like. Plenty of rentals might mean more competition for you, while fewer spaces available for rent might give you an advantage.
You’ll also want to compare what the going rate is in the building, identify which units are rentals, and find out how much the respective tenants are being charged to give you an idea of what you can expect to charge, too.
8. Pet Policy
If you have a furry friend that you want to take with you when you move, you’ll obviously want to know if pets are allowed in the building. If they are, find out if there are any restrictions on breeds, size, and number of pets allowed.
9. Resale Value
While you might not be thinking of selling while you’re looking to buy, it’s still important to consider resale value. If or when the time comes to sell, you’ll want to make sure the condo is an easy sell. Given this fact, units with more than one bedroom are usually easier to sell than studios and 1-bedrooms.
If your budget permits, consider going with something a bit bigger. Of course, you’ll want to consult with your agent before making this decision in order to verify if past sales of larger units in that building or area are in fact easier to sell than smaller ones.
10. The View
This could technically be placed under the “Resale Value” category, but it deserves its own section. The view that the unit offers is an important factor to consider. You don’t want to be staring at a dirty industrial complex or a dumpster from your balcony. Instead, you’ll want a unit that has a decent view.
Not only is this important for you, but it’s also important for buyers if you ever sell in the future. You won’t have much of a selling point if the unit you’re trying to sell has a horrible view. In fact, views are often key selling points for condos, so you want to make sure that the view of the unit you’re looking at is pleasant.
The Bottom Line
Buying a condo is a big deal. It’s your home, and you want to make sure the one you buy is worthy of the money you spend on it. Make sure to consider all of these factors when condo shopping to help you make the best decision for you.