Maybe you’re tired of shoveling snow, pulling weeds, or mowing the lawn. Or perhaps you just don’t need so much space anymore now that the kids have moved out, and are looking to downsize.
Whatever the reason, you’re thinking of buying a condominium. For many pre-retirees and retirees, moving from a single-family home to a condo is a first time experience. Over the years I have owned two houses and two condominiums and have learned that there are advantages and disadvantages, both in terms of finances and lifestyle, to both.
The biggest advantage of owning a house is that you can do pretty much what you want with it as long as you’re not violating any municipal or zoning laws. Having land surrounding a house also provides a buffer against neighbors.
Condos have a lot more rules and restrictions, and there’s less privacy because people often share common walls, ceilings or floors. Other than minor tweaks, changes to the external structure are not allowed, or highly restricted. Rentals may be limited to a small percentage of units, or prohibited entirely, and there are often age restrictions on who can live in adult communities. In my condo complex, there are limitations on flag styles (American flags only), where children or grandchildren can play ball, and where dogs can go. Then there are what I call “condo police,” a small but vocal group of owners who are quick to report even minor breaches of the rules to management or even make up rules of their own.
Yet for me, sacrificing some independence and privacy and paying $450 a month in condo fees is worth not having to worry about painting the house, maintaining a pool, shoveling snow, or tending to a lawn. It also makes possible maintenance-free access to a pool, boathouse, and tennis courts, and an oceanfront location where a single-family house would be well out of my price range.
If you’re thinking of “going condo,” there are some important considerations before you take the plunge.
These monthly charges typically range anywhere from $100 to $600 a month, depending on the condo’s location and what’s covered. But in some high-cost cities, such as New York City or Miami, they can easily be $800 to $1,5000, or more. Some condo communities may have lower fees that just cover landscaping and common areas such as pools, but not painting, roof repairs, or other responsibilities for the exterior structure. Other complexes may have higher fees, but also take care of external building maintenance and repairs in addition to common area facilities. Fees may also cover homeowners insurance for the external part of the structure, so you only need to insure for the inside of the house and any deductible the association’s exterior policy might have.
When you own a house it’s common to set some money aside for major repairs. Similarly, condominium associations are supposed to have reserves set aside from condo fees sufficient to cover unanticipated expenses. If reserves fall short of the cost for needed repairs each unit owner could be charged an assessment that can range anywhere from a few hundred dollars up to $15,000 or more. Aging facilities with peeling paint, curling roof shingles or neglected landscaping are red flags that point to poor management, and the likelihood of an assessment in the near future.
Be sure to ask if there’s an assessment in place while shopping. Realtors aren’t always eager to point them out (mine didn’t), so you may need to do some research on your own to get to the bottom of things. If there is one, and it hasn’t been paid off by the previous owner by the time you assume ownership, you’ll be responsible for it. Deciding who pays off existing assessments in a sale is a matter of negotiation. The buyer or seller may foot the entire bill, or both parties may agree to split the cost.
Larger complexes are likely to have a professional management service overseeing daily activities, while smaller ones might be governed and run exclusively by residents. Both are likely to have boards drawn from residents. Personally, I prefer independent, professional management companies because it’s less likely that decisions will be made based on the agendas of a few people on the board.
It’s especially important to check this out if you think you might want to rent your condo, either now or in the future. Many condos restrict rentals to 30 days or more, and some require leases of at least six months or a year to weed out the vacation rental crowd. Others cap the percentage of units in a complex that can be rented out, which is often around 20 percent or 25 percent. Rental restrictions are not necessarily a bad thing since condos with a high percentage of renters are often noisier and a large number of renters may detract from the sense of community. And, it’s often difficult to get a loan if over half the complex consists of rentals.
Because single-family houses often differ from one another, both inside and outside, home prices in the same neighborhood often vary more than prices for condos with the same floor plan and square footage. The fact that all condos look alike, at least as far as external appearance and internal layout are concerned, means there may be less wiggle room in price negotiations when you sell. On the other hand, it often gives you some leverage as a buyer when you can point to a similar unit that’s selling for less than the one you’re looking at.
Believe it or not, you can tell a lot by just walking around and talking to people, and it’s best to do this without a realtor acting as coach. What do the people look like? Are they young with families, or is it an older crowd? While many condominium communities skew older, particularly in retirement destinations such as Florida, others are more mixed. Go on a weekend when more people are likely to be out and about, and look at any bulletin board postings or websites to see if there are any social activities such as clubs or cookouts.
Check out how close units are to each other. Proximity to neighbors, especially if you live in a condo with shared walls, can be a downside if they are noisy or tobacco smoke filters through (I’ve experienced both). But, as I found out when we lived in a single-family house on five acres, space is a useless buffer if neighbors keep their loud, barking dogs outside day and night or are obnoxious in other ways.
Regardless of whether you live in a condo or a house having considerate people surrounding you is really important when it comes to achieving a happy lifestyle. Whether you live in a sprawling 10-acre mansion, or in a condo with three common walls, that’s mostly the luck of the draw.
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