4 Important Things To Consider When Buying A Condo

March 28, 2018

When it comes to buying a home, one of the first decisions you’ll need to make is the type of home you want to buy — a single family, town home, condo, etc. When my wife and I moved from California to the Midwest several years ago, we found ourselves shopping for a condo for the first time ever. The education we received through the process of buying, owning and now as landlords due to our move back to Cali was priceless. Here are the 4 things we learned to look out for when shopping for a condo:

1. Assessments (or HOA fees)

Be careful of these! This can take a supposedly affordable monthly housing payment and send it through the roof. For example, assume you have a mortgage payment of $1,500/mo and an additional $500/mo for taxes and insurance; that gives you $2,000/mo, BUT your building has assessments/HOA fees of $525/mo, so your real monthly cost is $2,525! You need to be aware of how that impacts affordability.

Know what it covers

You also need to know what you get for all that money, as each HOA is different. Often it will be landscaping, trash removal, water, common insurance and security. But take a close look because some assessments may also include pricey utilities such as gas and air conditioning (I actually saw one that included cable!).

You’ll also want to get an idea of what the HOA keeps in “reserves,” aka how much extra they have in their account to cover irregular expenses that come up. Which brings me to my next point.

2. Special assessments

This can be a tricky one as this type of assessment should only be implemented if absolutely necessary, but if you’re looking at a place that keeps low reserves, it could come up more often. Some examples might be for fixing a leaking roof or doing some retro-fitting in an earthquake zone. The bottom line here is that you will want to ask what special assessments have been levied in the past and what the likelihood of another is so that you can factor that into the total cost of what you’re buying.

3. Association budget

The answer to the aforementioned question often is answered by what the cash reserves looks like for the complex. Generally more established buildings have very healthy cash reserves so that most wear and tear type improvements — like a new roof due to age – will not require a special assessment. Always ask not only about the cash reserves but also how long the existing Board members have been in place.

4. Property taxes

This is on everyone’s favorite list and is pretty self explanatory, but be careful. Depending on where you live, and often in the same building (the higher you go, the better the view) you can find a wide range of tax amounts. Don’t just look at the average, get the numbers for the specific unit you’re looking at. Also note if it’s been many years since the property has sold — taxes are calculated based on property value, so if the unit is selling for much higher than it’s valued on by the county assessor, you could see an increase once your purchase price is recorded.

The bottom line

If you find yourself trying to decide between more than one unit, make sure you’re including all of the factors that come along with condo living. On one hand, it was nice to know that any issues with the roof or exterior would be shared with neighbors, but on the other, it can get very expensive very quickly if you don’t know what you’re signing up for when you buy.