4 Tips For Buying a Condominium

To paraphrase Bob Dylan, “It’s not a house it’s a condominium.”

A Homebuyer Associates’ client recently purchased a condominium. They decided they did not want the demands of maintaining a home and wanted the freedom to be away. A condominium purchase was right for the lifestyle they wanted. I cautioned our client that a condominium purchase can be fraught with challenges.

I am selling a condominium that my wife and I used to live in at 2555 N. Lake Dr, Milwaukee. (see the link below).

http://public.mlswis.com/cgi-bin/mainmenu.cgi?cmd=url+other/run_public_link.html&public_link_tech_id=zt6j1e5kgnj&cid=1

http://milwaukee.craigslist.org/reo/4094357490.html

One potential buyer of our condo opted for a newer condominium. They were not clients, so I could not counsel them about what to be aware of when buying a condominium, although ours is good.

I’ll use our condominium as an illustration of what to look for when buying a condominium. (If you know of anyone interested in purchasing our quality East side condo forward the link and have them contact me.)

1. What is the owner occupancy rate of the condominium?

The owner-occupancy rate for our condominium development is 96%. A potential buyer of our unit purchased a different, newer condominium (which shall remain nameless) where the owner occupancy rate was 58%. That means 42% of the condominiums were owned by the developer or by absentee owners. With no disrespect to renters, renters do not maintain property to the extent owners do. They have no skin in the game.

The lower the owner occupancy rate of the development, the greater chance maintenance will be deferred and the long-term Reserve fund for capital improvements underfunded. That is bad. If you are buying a condominium, take a very hard look at the owner occupancy rate. If you don’t, it is my opinion you are buying a long-term rental.

2. What is The Financial Condition of the Homeowners Association (HOA)?

When considering a condominium purchase, look at the financials, especially the Reserve fund for the HOA. A downtown condominium (again, remaining nameless) advertises “low monthly fees.” The sign should say, “Low fees now so you can get socked later for capital improvements when we are gone.” Maybe they just didn’t have space on the advertising sign. The truth takes 16 words and the false only 3.

Roughly 4 years ago it was it was time for planned capital improvements at the condominium I am presently selling. For that work there were no special assessments. We had adequate Reserves to install a new roof (20-25 year lifecycle); redo the courtyard (30 year lifecycle) and paint/caulk the exterior of the development. We continue to set aside sufficient Reserves for projects that will need to be done in 25 – 30 years.

Board members and Reserve fund planning should be pro-active, looking to the future and banking reasonable – not too low, not too high – funds for long-term capital improvements. If you look at a condominium that advertises or has low fees and low reserves – run. Those words which appear so attractive now mean special assessments will be needed in the future. You will use other &%$#! words then.

3.   What are the Monthly Fees?

You want monthly fees to cover items like landscaping, common electric, snow plowing, management fees and other routine maintenance costs. Sometimes buyers look at the fee structure and forget that as a home owner – factoring the time value of money – they may have spent the same or more than the monthly condominium fee to maintain their home. I find it one of the attractive features of condominium ownership.

4.   Noise Issues

Be aware of the quality of the sound insulation of the unit. All condominiums are not created equally in this respect. We advise clients to not be adjacent to a bus stop (start and stop noise); near a bridge that raises and lowers (and can give a pounding sound as traffic moves across the bridge); near a stop light (radio noise while waiting for the light to change) or above the main garage door entrance for a multi unit building. Little things matter.

If you have questions about condominium ownership or real estate in general, I believe the cost of a cup of Joe remains $1.89 at one of our local coffee shops. Contact me and we’ll talk.

Oh, yes. If you know of someone interested in our condo, pass the information on.