Buying a condo can be a daunting task, especially for a first-time homebuyer. With homeownership getting further and further away from your average person, many will find that a condominium is their only affordable option to enter the market. Here are a few things to consider when making that extremely important decision:
1) Dues
Dues are fees charged to unit owners that are their share of the development’s maintenance costs. Dues can make or break a homebuyer’s ability to afford the particular property they are interested in. Quite often people will look for the bottom dollar lowest dues possible, but that is not always the correct thing to look for. Often, low dues can be a sign of financial mismanagement and can serve as a red flag, especially for a first-time homebuyer. Make sure to identify the amount of the dues and take them into consideration while reviewing your personal financial ability to afford the property. Also remember that dues can be lowered or raised at the board’s discretion!
2) Association Finances
Buyers should request and review a copy of the Homeowners Association financials. Knowing if the HOA is running a deficit or surplus budget can help buyers understand the financial stability of the development. Additionally, buyers will want to know if the association has adequate funds in their Reserve account. These funds are used for capital projects, such as replacing a roof. If an association does a poor job saving reserves for these sorts of projects, the association will likely have to take out a loan, and/or issue a special assessment. Special assessments may be charged to the owner as a one-time fee or as additional monthly fees that could continue for many months or years.
3) Board Minutes
HOA boards keep minutes that are a record of their meeting. Reviewing the minutes can give prospective buyers an idea of how the current board members are running the association. Great insight can be gained from this review, not only about the development itself but also about the personalities and attitudes of the people running it.
4) Rental Ratio
High rental to owner-occupancy ratios can be an indicator of an association that will have fewer people living in it with a vested interest in the community at large. It may also be an indicator of increased costs for the association’s maintenance over time.
5) Amenities
Condominium associations can have all sorts of wonderful extras that can make life that much better. Types of amenities can include pools, tennis courts, golf courses, and other member benefits. An association’s dues should also reflect these amenities. The more amenities a homebuyer would like, the more they should be prepared to pay for them!
6) Leasing Restrictions
Whether you are a veteran who wishes to rent out their unit while on a tour of duty, or an investor looking for an extra income stream, a property owner’s right to rent/lease out their unit is extremely important. Often, associations will limit, restrict, or deny the leasing of units. A review of the association’s legal documents, usually the declaration and/or the Rules & Regulations, will reveal details regarding this topic!
7) Age Restriction
Some associations have restrictions regarding age. The most common kind of age restriction is for senior condominium communities. These types of communities restrict occupancy and/or purchase to people of at least a certain age, such as 55+. There are some communities that also do not allow children of a certain age, such as no children 12 or younger.
8) Rules & Regulations
Associations can sometimes have specific rules that will catch a buyer off-guard unless they are aware ahead of time. Going over an association’s Rules & Regulations can be very eye-opening. Rules regarding noise, trash, car maintenance, and pet ownership, amongst many, many other topics, can be found in this document. Sometimes homebuyers will not realize that their 55-pound dog is not allowed as the rules will stipulate that no dogs 50 pounds or greater are allowed. Always, always, always read a copy of the Rules & Regulations before considering your purchase.