What the experts say: should you buy a condo?
Should you buy a condo? Ask the pros and many will say yes. That’s because a condo offers the layout and livability of a single-family home with the low-maintenance lifestyle of an apartment.
This means you don’t have to worry about the hassle like mowing, snow removal, or roof replacement. In addition, the building can offer facilities such as a fitness center or an on-site swimming pool. Other perks may include a doorman, clubhouse, or concierge service.
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But condos are not for everyone. There are a few drawbacks and risks involved. You must investigate carefully before buying a condo. It is worth shopping at different prices and considering different neighborhoods as well.
Condo rules can govern what pets you have, the way you do your laundry, your yard, even when and where you wash your car.
Curious about what the best financial gurus think about condos? Read on for ideas.
Dave Ramsey’s advice
Dave ramsey, national bestselling author and radio host, said on his radio show:
“I own a few condos, and they are doing fine,” he said. But “if you’re going to buy a $ 100,000 condo or a $ 100,000 house in the same neighborhood, on average, the single-family home is probably going to increase in value.”
Ramsey says there are two main areas to consider before buying a condo. One is the condition of the neighborhood. The other is the quality of the management of the condominium association. A poorly maintained property is a red flag. The same is true for a high ratio of rental housing to owner-occupied housing. Both of these issues can prevent the resort from obtaining financing.
“If they can’t get FHA, VA, or conventional funding, values will drop like a rock. Because at this point you only have cash buyers and investment buyers.
Ask questions of the management company and / or the relevant real estate agent.
“What are the reserves for the roof? What are the reserves for painting and parking? Are they collecting enough to pay their bills? Are they really paying their bills?
If you buy your condo with a regular mortgage, the lender will investigate many of these issues because they want to minimize your risk of default. But also ask yourself questions.
“Would I like to live here and have my wife and children here?” Would a normal and reasonable person want to live here? If the answers are yes then you probably have a good, solid condo complex and it is good to do so.
Suze Orman’s advice
Personal finance expert Suze orman was asked: should you buy a condo instead of a house? In an Oprah.com column a few years ago, she wrote:
“If you are determined to own a home, know that a lower price for a condo does not necessarily mean lower risk,” she said. “Ask your agent for data on the evolution of local condominium values versus single-family homes in recent years. “
Orman suggests meeting certain criteria before purchasing. One is to be able to afford the HOA fees. Another is that at least 90 percent of units must be owner occupied. A minimum of 10 percent of the HOA’s annual budget must be put into a reserve fund. The annual increase in monthly maintenance costs is also not expected to exceed the general inflation rate (3%) in recent years.
Also, only buy a condo if “97 percent of the development’s residents are up to date with their monthly payments.” Remember, it is the other owners who must make up the shortfall when some owners fall behind.
The main mechanical elements and the roof of the building should also be newer. “If a development requires major upgrades, you may have to pay an expensive ‘special assessment’ fee after you move in,” she warns.
Finally, Orman suggests speaking to a few owners of the complex. “They can be your most valuable resource for learning more about the pros and cons of development. “
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Scott McGillivray’s advice
Should you buy a condo? Scott, host of HGTV Income Property Mcgillivray was interviewed about it for a blog.
“A condo is a very different purchase, obviously. A condo is a lifestyle. Usually, you are among many people. You have workout facilities or shared accommodations, but you also have condo fees, which can get out of hand.
Still, he believes condos are great starting places. And you can often buy them for less than a single-family home of a comparable size.
“In general, I say that a condo is a good first step. A house is a good second step.
Caution ? “Be aware if you are going into pre-construction. The difference between the date of possession and the date of ownership. There is a cost to that – shadow rent to the condominium corporation.
Sandra Rinomato’s advice
Canadian real estate pro and television host Sandra rinomato intervened on this subject for an HGTV column:
“New condos tend to be smaller, sometimes no more than one bedroom. While older units generally have more square footage.
She said you need to be prepared for the shock of the maintenance fee stickers.
“You can’t negotiate maintenance fees with a condo, and those fees tend to go up periodically. “
The owner / tenant ratio in the building is important.
“You don’t necessarily want to buy into a building that has a high percentage of tenants because they don’t take care of the property like they would if they owned it. “
Finally, be prepared to forgo some comforts or savings if you desire a trendy urban location.
“If you’re going to live in the city, you often have to sacrifice space.
Clark Howard’s advice
Consumer expert and host of his eponymous show, Clark howard love condos. For proof, consider his first real estate purchase: it was a foreclosure condo bought 41 years ago.
“I still own it and it’s a very profitable rental property for me over time,” he said on his website.
But should you buy a condo in today’s market? Recently, Howard has gotten a little sour on this type of house.
“In general, the condominium market is fraught with many dangers,” he said. These include “the issues with people not paying their association dues and the direct impact a foreclosure can have on every owner of a condominium versus a single-family home neighborhood.”
He thinks the condo market has been in high risk, high reward mode lately.
“Realize that you might buy and not be able to sell for a long time. This is the danger, even if you are a cash buyer.
If you are buying a condo, plan to keep it for the long term.
“If you buy, be aware that you will have to own the property for at least 10 years.
Do your homework
Should you buy a condo? It depends. Condos are a different type of property from single-family homes. They have their advantages and disadvantages. But as long as you do your due diligence, you shouldn’t regret buying a condo.
Gather the facts and consult your own experts. These include your trusted real estate agent, chosen lender, and real estate attorney. Also talk to the residents of the building. And determine your life goals. A condo could be your ideal home for the foreseeable future.
Check your new rate (Jul 3, 2021)