Author Topic: Are condos always a bad idea?  (Read 18310 times)

maxsilver

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Are condos always a bad idea?
« on: March 01, 2015, 09:57:46 PM »
Very new Mustachian here. I've been searching the forums for info, and seeing a lot of hate on condos, and it seems fairly reasonable. 

But are there situations where buying a condo is a smart, "mustachian" choice?


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Story time : I purchased a house three years ago. I thought I got a great deal. (Close enough to bike to work, near public transit, near downtown, beautiful neighborhood)

However, it was 120 years old, and it had a lot of maintenance needs.  We ended up having to sink $22k into it last year (new water heater, new furnace, new insulation, new roof, two dozen small things, etc.). Half went onto a personal loan. Half on a credit card.... (Danger zone -- Emergency! I know. I know. Trust me, I know).

It's burned me. Fixing smaller house stuff I feel pretty comfortable with, but having major things hanging over my head (like when water was leaking into the house from our shot roof, in multiple rooms) was incredibly terrifying and stressful -- we're finally selling that house and renting somewhere, and not having to worry about major repairs is a godsend. I feel like I can finally breathe for the first time in years.

- - -

Now, we're looking at condos. Compared to the house, it's about 90 years newer, larger, nicer, in better condition,  and in a better school district. Additionally, the wife approval factor is much higher.

As far as I can tell, it's also much cheaper. My admittedly-inexperienced inner mustachian is getting excited by these numbers:


- Old Drafty Victorian House (3bed, 1200sqft) : ~$1400-1600/month (mortgage, taxes, loans for major repairs). 15yr, 10% down mortgage
- Our temporary in-between-places apartment :  (2bed, 600sqft) : $850/month.  Free heat.
- Potential New Condo (3bed, 1400sqft) : ~$900/month (mortgage, taxes, and HOA fees included) - 15 year fixed, 20% down (no PMI?)

Gas and electric should both be cheaper in the condo, although I can't quantify that directly.
Once the mortgage is paid off, condo drops to about $400/month (prop taxes + HOA fees only).

Our current apartment is cheap because it's small and way at the edge of town - almost no transit :(
To rent a place comparable to the condo would cost $1200/month today (probably $1500/month or more in 15 years, when our condo mortgage would be paid off).
 

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I see a lot of downsides to condos. But I think most of them might not apply to me :

- People seem concerned about relocating for jobs. I would *love* to do this, but I've never been able to. Despite my best attempts to do so, I've never landed a job out-of-market, but have landed multiple solid job offers here in the last five years. I'm not willing to leave without a job lined up, so the chances of us ever actually leaving this market are very low. (Family and friends also live here, which is convenient).

- People seem concerned about wanting to own *land* or property. I hate managing land. I don't ever want to mow grass, plant gardens, shovel snow. I don't disparage anyone who likes these things, but this is a source of stress for me, not pleasure. I consider it a huge plus to not need to stress about it.

- People seem concerned about needs changing. My needs are probably set. I'm already married, already have a child on the way. Additionally, we shouldn't ever outgrow this place -- the condo is basically house-sized already (3bed, 2.5ba. 1500sqft. A basement also exists that appears like it could easily be finished which would add lots of extra sqfts of living space).

- People seem concerned about bad neighbors and crazy HOAs. I also am concerned about this - I have zero experience with condos. But it can't always be terrible, right? Why does anyone buy condos, if these HOAs are all terrible?

- People seem concerned about forever paying HOA fees, on top of property taxes. This is totally true, but I think it might be an OK compromise. Comparable standalone homes are $20k - 40k more expensive than this condo is, and the HOA fees are only about $200-$250/month. It would take 13 years of HOA fees to become higher than the extra cost would be for a single family home -- not to mention the extra mortgage interest we'd pay, and any potential major repairs that would need to be made in that time.

- People seem worried about not being able to sell or rent condos easily. It's a very illiquid asset. I am also worried about this. The chance of us wanting to rent the place is very low, but I could see us needing to sell if something terrible happened. I don't have a workaround for it -- probably my biggest fear.

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Wise, experienced Mustachians, is there something I'm missing? Is there some trick or gotcha I have not uncovered? Logically, this seems like a potentially solid decision financially. And I love the idea of getting apartment-like levels of no-stress, but not having to worry about the rising home / rent costs. I love the idea of owning an apartment, but paying only 1/3rd "rent" for it (once the mortgage is gone).

However, conventional wisdom (including some of the posts I'm reading here) state that condos are a generally all-around bad idea. I'm trying to figure out what I'm missing that makes this such a bad idea.
« Last Edit: March 01, 2015, 10:02:34 PM by maxsilver »

N

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Re: Are condos always a bad idea?
« Reply #1 on: March 02, 2015, 12:53:34 AM »
Im speaking as a former condo owner. I lived in a 20 unit building in a major city.

HOA fees only go up. They never go down. There are special assessments. There are owners who foreclose. This drags your unit value into the dirt. There are owners who dont pay their assessments and require legal action. There are owners who are hoarders and have severe pest problems. THere is non compliance with HOA rules and regs. Owners rent out their units to people who do not have a vested interest in the building. You essentially own part of a building with however other many people who may have totally different values, morals, and sense of financial responsibility or ability.

Never say never, but I dont ever think Ill buy a condo again. Burned too bad.

Ricky

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Re: Are condos always a bad idea?
« Reply #2 on: March 02, 2015, 02:21:10 AM »
I just don't think I could ever deal with the fact that there's never total silence. Soundproofing only does so much. You're always going go hear low frequencies like someone dropping something above you or loud feet. You're also going go have hallway noise. You're at the mercy of how well the building was built, and you have little idea going in, which always scares me.

If you can live with that long term (I couldn't) then condos aren't always necessarily an automatic bad choice. The quality of the HOA is the biggest issue, and like previous poster said, that can change dramatically over time. If you can't see the value in the HOA fee or there are frivolous expenses like a tennis court or pool then it's probably a waste of money. But I don't necessarily see the HOA as a waste of money automatically. You're paying for virtually 0 maintenance and usually water/sewer/trash automatically, which is worth a lot sometimes.

The biggest thing is anyone telling you to buy or not buy a condo is that their experience is highly anecdotal.

I think the Mustachian choice is to buy slightly outside the city where you get more for your money anyway. A house is easier to rent bedrooms out in as well if you ever need extra cash. That's just my opinion, since its usually a larger space and there's more breathing room. Just make sure the commute isn't totally miserable.
« Last Edit: March 02, 2015, 02:57:03 AM by Ricky »

jennifers

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Re: Are condos always a bad idea?
« Reply #3 on: March 02, 2015, 06:44:51 AM »
I own a condo that I don't regret. My HOA board has been reasonable so far. I think as long as you know what you're getting into it can be a smart investment. I'm not planning to make a bunch of money when I sell, but for now it's an economical place to live. Make sure you read all the HOA documents before you buy. 

Rural

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Re: Are condos always a bad idea?
« Reply #4 on: March 02, 2015, 07:18:43 AM »
It's always struck me that a condo gives you the worst of both worlds - you get the bad effects of ownership in the expenses and the bad effects of renting in the lack of control of your space. The only plus is that it's cheaper than buying a house, but I definitely would avoid unless it's also cheaper than renting an apartment.

MandalayVA

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Re: Are condos always a bad idea?
« Reply #5 on: March 02, 2015, 07:29:14 AM »
If I had to do it over again, I wouldn't.  I've just started a journal and one of the entries is about the problems we're having in our condo.  Caveat emptor.

Bracken_Joy

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Re: Are condos always a bad idea?
« Reply #6 on: March 02, 2015, 07:35:59 AM »

- People seem concerned about forever paying HOA fees, on top of property taxes. This is totally true, but I think it might be an OK compromise. Comparable standalone homes are $20k - 40k more expensive than this condo is, and the HOA fees are only about $200-$250/month. It would take 13 years of HOA fees to become higher than the extra cost would be for a single family home -- not to mention the extra mortgage interest we'd pay, and any potential major repairs that would need to be made in that time.


This is the one that jumped out at me- the difference between $20-40k more on a single family home vs HOA fees is that in general the house cost is recoverable (or can be recoverable, anyway) whereas the HOA fees are a sunk cost- you won't get those back.

The other thought I had was about the, "I don't see my needs changing" when you have a child on the way. Views about yards, neighbors, etc, change dramatically when you have first an infant that you JUUUUUST get to sleep, then a neighbor slams a door, and then when you have a toddler (all of whom are nudists) who you would like to be able to unleash pantsless into a fenced yard.

Just some thoughts =)

Ynari

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Re: Are condos always a bad idea?
« Reply #7 on: March 02, 2015, 07:37:52 AM »
I haven't purchased a condo (yet), but as I've been looking at potential homes, I tack on about $25,000 to the purchase price (mentally) for every $100 of monthly HOA fees due. (I used the NY Times Buy vs. Rent calculator and my particular circumstances to derive this estimate by comparing two scenarios with equivalent rent equilibrium; it might be different based on how long you plan on owning it.)

It really helps make a lot of the "cheap" condos less appealing because so many of them have HOA fees in excess of $200, and that's just nuts if you're looking at it as $50,000 instead of $200.

I still consider condos, though, because I can find a smaller space in a good location for cheaper, and that is my priority at this point in my life.

FarmerPete

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Re: Are condos always a bad idea?
« Reply #8 on: March 02, 2015, 08:06:21 AM »
Just remember that an HOA isn't a home warranty.  The HOA is going to break even or make money.  In other words, if the HOA covers a repair to your house, best case scenario is that your HOA fees are going to go up.  Worse case is that you'll get a special assessment for a large chunk of dough.  You don't mention where these three locations are.  I have a feeling that you've left that out as the prices are so different, I can only imagine that the reason boils down to location.  Also, have you priced out apartments near this condo?  It's very possible that you can find something a little smaller or with a few less perks for cheaper.  If it were me, I'd seriously look around more.

For me, I would only get sign up for an HOA if I could be on the board.  You have to realize that they can make new rules that are legally binding.  I had a friend who put on brand new vinyl siding to their house.  It met with the HOA standards and was approved.  The next year, the HOA decided that they wanted to change the colors of the houses.  My friend had to pay to replace the year old siding or paint it (negating the value of the siding).  They were not happy.  Really, the only benefit I see from an HOA is the reduced outside upkeep.  Things like snow/grass/landscaping/etc, and maybe the amenities (pool/gym/etc).  Even then, I would look at what you're paying.  Odds are that you can hire someone for less than the HOA fees.  Personally, I just do my own stuff, as that's basically free.  I'd only consider paying for it directly or indirectly via HOA if I was incapable of keeping up with it.  For example, if I travelled for work a lot.  Who wants to get back from a week business trip to an overgrown lawn, mow it, and then fly back out on Monday?  No thanks.  I mow my lawn once a week, and it takes me 30-40 minutes.  I mulch over my leaves with the lawnmower, so that doesn't take much time.  Snow is more a pain, but really, all you HAVE to do is the sidewalk.  We park in the garage and hardly ever walk outside.  If I'm in a hurry, I'll make a quick path from the door to the sidewalk for the postman, and then a quick 1 minute clearing of the sidewalk.  Not a big deal.

Field123

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Re: Are condos always a bad idea?
« Reply #9 on: March 02, 2015, 08:09:32 AM »
I think this is a very situation specific question, but I would never say that condos are always a bad idea. We would probably need more detail to be sure, but based on the facts provided, it sounds like a very reasonable and mustachian idea for your situation.

I work as a real estate attorney and realtor in Chicago, and here, I would say that condos are more often than not the most mustachian choice.

For instance, I live in a highly desirable neighborhood where I can bike to work or take public transportation and be there in about 20 minutes. Entry level single family homes start at about $900,000 for a complete fixer upper. Anything nice is north of $1.4MM. Along with those high purchase prices, real estate taxes are $15-25,000 per year.

My condo cost $265,000 and has taxes of $3,000/yr and HOAs of $175 per month. With that HOA fee, I get landscaping, garbage collection, and water. These services are probably worth at least $100 per month themselves.

Depending on the market, condos can be more illiquid than houses. However, at least in places like Chicago, I would say they are equally if not more liquid due to their affordable nature. You would really have to do some market research to be sure.

As others have mentioned, the big thing with Condos is the HOA. I would be less concerned with "wacky" HOA members and more concerned with building finances. The key is to really evaluate the books before closing on the condo. In Illinois, law requires full disclosure of condo finances during the attorney review period -- take this seriously and make sure there are adequate reserves for major repairs such as balcony's or roof. As long as the reserves are there, I really wouldn't worry about anything else. Also -- get on the condo board! My building has to beg to get enough people on the board. It's great being in the loop and having a voice in every capital expenditure.

Good luck!

mlejw6

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Re: Are condos always a bad idea?
« Reply #10 on: March 02, 2015, 09:12:55 AM »
Commenting so I can following the thread. I, too, am considering a condo. Where I live, they are considerably cheaper than homes - minimum 100k cheaper than comparable homes.

Retire-Canada

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Re: Are condos always a bad idea?
« Reply #11 on: March 02, 2015, 09:33:45 AM »
I've been involved in 3 condo situations. 4 if you count one of my ex-GF's whom I spent a lot of time at her condo.

I've never enjoyed one of them enough to go back to that arrangement.

It's possible that when I am 65+ I may see a condo as a viable way to extend my living without assistance if my investements have grown to the point where the extra costs don't bother me and I don't want to keep looking after a house.

I play that one by ear.

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Yankuba

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Re: Are condos always a bad idea?
« Reply #12 on: March 02, 2015, 09:34:02 AM »
Commenting so I can following the thread. I, too, am considering a condo. Where I live, they are considerably cheaper than homes - minimum 100k cheaper than comparable homes.

Ditto - condos/co-ops are what I can afford in my HCOL area. Before you buy check out "Tips and Traps When Buying a Condo, Co-op or Townhouse" by Irwin and "The Co-op Bible" by Shapiro. They will let you know what questions to ask and how to avoid pitfalls.

jeromedawg

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Re: Are condos always a bad idea?
« Reply #13 on: March 02, 2015, 09:55:35 AM »
In a condo now that I co-own with my parents. Got in on it in 2007 before the bubble. If I had to go back and do it all over, of course I'd wait and save more for a single family home. Those are almost always preferable over a condo...at the right price. But at the time this seemed like a good way to go, especially because I was single and not too picky. Soon after though, I found out about how poorly constructed the flooring of the unit above was by my neighbors super-loud foot traffic (he was only one guy too who had his family over several times a year). The actual owners of the condo moved back in and had major renovation done (including hardwood floors, which I'm thinking might have gone against HOA rules because many HOAs disallow hardwood flooring in the upper unit for the purpose of preventing noise creep into the unit below). The noise creep is unavoidable either way though. We hear foot traffic from the neighbors above but it could be a lot worse. They're generally reasonable people but we have had to confront them on several occasions about certain things - the son of the neighbors and or boyfriend of the daughter was flicking cigarette butts into our yard (which was primarily wood chips and lots of plants at a time). I uncovered about a dozen or so while cleaning up and ripping out plants back there. Whenever the neighbor's grandson is in town, it's a ball...for him. There is a constant pounding of feet and running across those hardwood floors all day long (but this only usually happens 2-3 times a year, fortunately). Had I known all this, I would have avoided it. It's a nice unit in a nice area but the little things just catch up to you after a while.
And starting out, I probably would have looked for a town-home or one of those condo units where you only share walls but have both floors (there are units like this in our community, which we really should have looked into getting instead).
I'm never buying a place where there's someone living above me again.

ysette9

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Re: Are condos always a bad idea?
« Reply #14 on: March 02, 2015, 10:49:07 AM »
I think the answer really is "it depends". It depends on the HOA, who the neighbors are, and how the building is constructed. I have lived in a brand-new construction condo in a downtown urban area that was virtually silent because the insulation was done so well. The HOA was tedious but not unreasonable and the other neighbors were okay. I would definitely buy a condo again and we are considering it now. Then again, we live in a high COL so condos are a reasonable option. This also means that condos are still expensive so the standards to qualify and buy a condo are relatively high.

neil

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Re: Are condos always a bad idea?
« Reply #15 on: March 02, 2015, 10:49:43 AM »
Where I live, there is one complex where the condos are 2-level vertical, so no up/down neighbors and they are relatively new (2006).  If I knew I'd be here for 10+ years, a 1BR would have probably saved me money.  But it is in context of a lot of factors.

- I want to live near where I work because it has the double bonus of a bike-level commute and the neighborhood is wonderful.  Family oriented.
- There are few houses in the neighborhood I would consider.  Most would result in an increase in cost of living due to taxes and most HOAs for houses are in the 150-200 range here.
    - The condos I would consider are $260; you have to expect assessments, I agree, but it is still cheaper after factoring for taxes.
- The difference in low end housing vs a condo is nearly triple.  It takes a lot of my assets out of the market or reduces my cash flow to add to it substantially.  After paying cash for a condo, the HOA fees would easily be covered by VTSAX yield alone.
- I am not a fan of spending my life on house repair duties during my engineering work career.  I handle stress by having a low-maintenance home life as balance.
- Being in engineering makes the long term prospect of any job shaky.  The area is dependent on a single employer, which I work for.  It risks both my job and local home values if they reallocate work away from here.  Values are clearly inflated compared to adjacent markets and there is an obvious 33% downside.  I fully understand the consequences because I grew up in an IBM neighborhood and they nearly shut down the plant twice.  Even during the tech boom in the 90s.
- I might not live here forever.  Nothing attaches me to the area besides work.  It's a nice retirement area but there are lower cost of living areas I would prefer.
- Rental yield is terrible.  Any housing is not ideal for future rental income.  Condo would be less of a commitment than a house.  (I rent instead.)

Having said that, I also am fully aware of the downside, which is why I never really considered it in the first place.  My parents rent a condo that has fluctuated from ~$60K at move it, bottomed out at ~$25K (they offered it to my parents at that price in 95) to $150K at the bubble to $60K now.  HOAs are typically $500-800 (depending on building) because they are 50+ years old.  They have to keep several full time positions for maintenance.  And after 50 years, condos don't hold up too well because the occupants provide varying amounts of care to the units.

The yield can actually be quite good on said apartment, but it is very expensive when unoccupied.

jeromedawg

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Re: Are condos always a bad idea?
« Reply #16 on: March 02, 2015, 11:17:50 AM »
BTW: I think if you have issues with the condo noise, etc itself, you do have to factor in other things such as location and commute. For my wife and I, we've put up with the minor noise and have learned to live within the means and context of our neighbors and what not. We couldn't ask for a better location and commute (for me it's 15-20min max and for my wife it's around 30min). Sure, you could buy a newer condo that might be better soundproofed etc but you're likely going to pay more and because it's newer it *might* be further away (but only from work usually, as condo builders usually try to keep in mind vicinity to shopping plazas, schools, etc). There are always trade-offs. In the long-run, the noise isn't a huge deal but now that I'm married and may have a family soon, and for the long-run, I'm going to avoid living on the bottom-unit of anything. And since I also want to avoid stairs (unless it's part of a 2+ story home), the next logical step is either a town-home or single family home for me if at all possible. Oh yea, I forgot to mention that soon after they did renovations upstairs, there were a couple "leaks" into our second bathroom from their second bathroom (directly above). Apparently the contractor didn't do a good job sealing fixtures on their bathtub so when water went into the overflow, it went straight through our vent and fortunately into a garbage can that was positioned almost exactly under the vent. This happened twice in the beginning. No other issues since then. But we weren't very happy about that either.
Oh and another thing - the HOA builder had fire sprinklers installed in every unit and at some point one of the sprinklers was leaking in the second bedroom. I had to pay an exorbitant $300-400 for a fire-certified plumber to come out and swap it out. It's definitely not something our HOA covers.

thedayisbrave

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Re: Are condos always a bad idea?
« Reply #17 on: March 02, 2015, 11:21:02 AM »
I'll chime in with more of the same... it depends on your area.

I have the most experience with condos, as in my area they are cheaper and have less maintenance, which fit what I needed as a new real estate investor back in 2011.  Where I live, there's a pretty good range of single family homes, condos, townhomes and apartments.  I have two condos total that are both used as investment properties and they cash flow well compared to what I could get as a single family rental.  As an investor I had my eye on maximizing cash flow rather than potential appreciation so that is why condos fit the bill here.

Just make sure you do your due diligence.  Look at the HOA by laws, finances, history etc.  Both of mine could be better, but they could be a lot worse as well, and there hasn't been any special assessments.  They are extremely low maintenance, as the HOA fees will typically cover water, sewer, garbage, electricity (lights in common areas), landscaping, snow removal, pet areas, tree removal, building upkeep and maintenance, roofing issues etc. 

Both of my units are on the top floor so any noise that comes in is from the neighbors to either side.  It depends on how it was built, the first one I purchased has PAPER THIN walls so even someone playing music in the next unit over would be heard.  This 2nd unit that I have is soundproofed much better, I have one neighbor to either side of me but the only things I tend to hear are garbage trucks and dogs from outside.  I also feel much safer in a 3rd floor unit.

You are definitely closer to your neighbors, but if you're vigilant/observant you can generally get a feel for noise levels etc. when viewing the property.   
« Last Edit: March 02, 2015, 11:22:59 AM by thedayisbrave »

Tyler

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Re: Are condos always a bad idea?
« Reply #18 on: March 02, 2015, 11:33:23 AM »
On the surface, paying nearly half of your monthly payment in condo fees and property taxes (even with a shorter 15 year mortgage) sounds like a bad deal to me. Especially when both will absolutely rise over time.

If the primary concern is maintenance costs, I feel like there's a good range of options between an old money-pit house and a new condo with high fees. Take the money you feel like would be a fair condo fee amount to cover repairs, and just set that aside every month in a home repair fund. Then move to a nice inexpensive home with good bones and no HOA. 
« Last Edit: March 02, 2015, 12:07:30 PM by Tyler »

JoJo

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Re: Are condos always a bad idea?
« Reply #19 on: March 02, 2015, 12:14:02 PM »
For me, buying a condo has been one of the worst decisions of my life.  Bought for $550K at the height of the bubble, it's now worth $350K if I'm lucky (houses are nearly at par but there has been a boom of new condos in a city about 3 miles from my place affecting the condo prices).  Out of 20 units, we have two owners that are sue crazy and are constantly bringing action against the board.  Out of the $3720 in dues I will pay for the next year, $500 of this is already slated for lawyer fees because of these two.  50% of the units are now being rented (although maybe I shouldn't complain about this because I'm considering turning it into a rental when I retire early).

That being said, there have been some advantages.  I love to travel so it's so easy to lock it up and leave it (have taken trips varying in length from 1-12 week).  I like the location and view.

This will likely be the last condo I own.

Bob W

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Re: Are condos always a bad idea?
« Reply #20 on: March 02, 2015, 12:25:43 PM »
My sister bought a condo in Hawaii (Kauai) 15 years ago for like 80K.   It bumped up to 700K at one point.   Think maybe 300 now.  Her trick was to buy it a couple of years after Hurricane Ineki when prices were low.   

In general I would avoid them unless they are very much on sale.   

Bracken_Joy

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Re: Are condos always a bad idea?
« Reply #21 on: March 02, 2015, 12:38:49 PM »
FuckRx has gone through a few condos I know, he talked about it in his journal. Might be worth checking out.

Beaker

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Re: Are condos always a bad idea?
« Reply #22 on: March 02, 2015, 01:36:11 PM »
You might ask yourself how much more deferred maintenance there is on your current house. You might have just pushed through (and paid for) most/all of the necessary repairs, and be selling it just as you get to smooth (or at least smoother) sailing.

On to condos, clearly there are a lot of lifestyle issues with condos, but that's really a personal choice. If you're lived in apartments before and were fine with it, then you'll probably be OK in a condo.

I think a lot of people get wrapped around the axle on HOA dues because the cost is made obvious, but then ignore the less-obvious expenses of owning a house. The dues for a reasonably well-run condo can be less than the cost of equivalent utilities and the occasional major repair in a house. Of course, a poorly run HOA can be super expensive - a friend's HOA was paying $200/month to polish the elevator doors.

People also get worried about the neighbors, but living in a house is no guarantee that you have good neighbors. We passed on buying a house where the neighbor was a hoarder that had piled random stuff 6 feet high to the exact edge of the property line. I've seen people in houses just throw their trash in the backyard, or never repair their house, or deal drugs in the front yard, or have parties every weekend and throw all the empty bottles and cigarette butts into the neighbors' backyard.

That said, I second what everyone said about checking out the HOA finances and rules. Get the books and actually read them carefully. See what they're paying for. See what their reserves are, and make sure they're going up. Get the board meeting minutes, or go to a meeting if at all possible. Try to figure out if the board is running smoothly, arguing constantly, getting ready to make some ridiculous rule change, so dysfunctional they don't even have minutes (or meetings!), or what.

My personal HOA horror story (apparently everyone has one) is that we got one board member who is ridiculously tightfisted, to the point that he thinks each unit owner should separately maintain the brick on the outside of the building that adjoins their unit and the bit of roof that shelters their unit, rather than having the HOA do it. He's managed to get the board so tied in knots that basic stuff like snow removal from the sidewalks (which is required by law) is not being done properly. He was able to do that because the guy that set up the HOA rules did a fantastically terrible job of it that left the definition of the Limited Common Elements (vs Common Elements) open to interpretation. I really wish I had read that part more carefully.

Kris

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Re: Are condos always a bad idea?
« Reply #23 on: March 02, 2015, 01:54:41 PM »
I currently own a condo, and I have a comment that I haven't seen anyone else say yet, or at least not in this particular way.  One of the negatives of it is, you are beholden to the decision of the condo association regarding any necessary repairs that come under the umbrella of the association rather than your own individual unit.  Case in point:

I have a situation right now where there is water damage to my unit (inside walls) cause because of a problem with the integrity of the exterior walls. The issue has been going on for a while now, and it has been very difficult to diagnose and fix the problem.  Eventually, we had a company that specializes in this kind of thing come in and do a day-long series of diagnostic tests, at a cost to the association, which had been voted on and approved.  But after this, the company said that they wanted to do one more test, which would incur additional expenses. 

The association is balking at paying any more for testing.  Problem is, my unit is the only one seeing interior damage, so the other members are less inclined to feel the urgency than I am.  So, basically, unless I want to pay for the additional testing myself, I am at the mercy of the condo association's vote.  Meantime, my walls are getting worse.  If I owned a home, I wouldn't have to consult with others before doing this testing.

There are plusses and minuses to condo ownership.  But if I had the choice do it again, I wouldn't.

mnsaver

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Re: Are condos always a bad idea?
« Reply #24 on: March 02, 2015, 04:31:51 PM »
I haven't purchased a condo (yet), but as I've been looking at potential homes, I tack on about $25,000 to the purchase price (mentally) for every $100 of monthly HOA fees due. (I used the NY Times Buy vs. Rent calculator and my particular circumstances to derive this estimate by comparing two scenarios with equivalent rent equilibrium; it might be different based on how long you plan on owning it.)

It really helps make a lot of the "cheap" condos less appealing because so many of them have HOA fees in excess of $200, and that's just nuts if you're looking at it as $50,000 instead of $200.

I still consider condos, though, because I can find a smaller space in a good location for cheaper, and that is my priority at this point in my life.

You also have too look at what is included in your HOA fee. Mine is $350 but it includes heat (probably $50+ a month 4-5 months out of the year), water/trash/sewage (another $40 - $50), gym (which I previously had and was able to drop), the associations share of the property taxes, at which point mine are lower since I'm only paying on my unit, not the building or the land, insurance on the building, office staff/care takers, pool, and party room. Since the building I live in is a much better quality building then my previous apartment my HO6 insurance is half that of my renter's insurance. (I live in a high rise downtown which does up the cost considerably.)

It is very important to look at the books and make sure they are setting aside money for repairs/replacement. Mine has a fairly detailed 30 year plan that shows when things will need to be replaced they are really good at making sure the money is there. You also want to look at how many units are delinquent on their associations fees and by how much.

SummerLovin

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Re: Are condos always a bad idea?
« Reply #25 on: March 02, 2015, 05:45:05 PM »
I was just having this conversation with my brother as I am a homeowner and have been thinking about downsizing, and not having to do yard work is very appealing. His biggest word of caution (he lives in Florida where condos are often the rule) wasn't just the HOA board, but other owners who can't or won't pay (some are suing the developers, others are broke or lost jobs).  The cost of the foreclosures hit the other owners in the form of ever increasing dues. One of his friend started in 2007 with $400, and now it's up to $900 with another increase around the corner. 
That's my biggest fear. With no limit on the increases, at some point you'll be forced to move, but won't be able to sell without taking a huge loss. Good luck trying to sell a 2 BR condo with an $900 HOA dues. BTW that is monthly not annually:)
I'd rather pay 15-20K more for a single family home and outsource the yard work. I'd still come out cheaper.
It REALLY depends on your market, and how much privacy and quiet you're willing to give up.  As another poster said, do not underestimate the changes and considerations a child adds to the home buying decision.
Cheers!

DarinC

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Re: Are condos always a bad idea?
« Reply #26 on: March 02, 2015, 06:09:42 PM »
Like everyone said, it's less expensive, easier to maintain, easier to lock up for a trip, and possibly easier to rent. The downsides are being stuck with a bunch of people you may not like, being stuck with an HOA you may not like, and not being able to expand, modify, and improve your condo in the ways you could with a house.

frugaliknowit

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Re: Are condos always a bad idea?
« Reply #27 on: March 02, 2015, 08:17:38 PM »
Condos are not always a bad idea.  In some markets (north side of Chicago, where I live), they are the only affordable housing.

As far as getting stiffed by other homeowners not paying assessments, yes, that can be a problem.  Last year my association (a very large one that aggressively enforces collections) lost $35,000, which cost me about $61.  It was worse a few years back at about $50,000 or $88 for the year effectively stolen out of my pocket. 

When you own a single family home, you have the option to do work yourself.  The common areas of the condominium complex are maintained at going labor rates.  Some of the employees are union.  There are some cancerous inefficiencies like the assessments charged for the parking garage not even covering the cost of the 24 hour attendant, such that owners who don't use the parking garage are subsidizing those using it. 

The pluses are you don't have a lot to deal with compared to owning a house and your expenses are more predictable and arguably much lower than if you owned a home and hired help for everything.
Modify message.

True:  HOA fees only go in one direction, up.

So do expenses on houses.

SeattleStache

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Re: Are condos always a bad idea?
« Reply #28 on: March 03, 2015, 12:03:02 PM »
I just bought a condo last month (First Hill neighborhood in Seattle) and so far am happy with my decision. Seattle is getting crazy expensive and with 20% down, my mortgage, insurance, taxes, and HOA fees are still less than what it would cost to rent a comparable 1 bedroom, 1 bathroom apartment. I have an easy, 1 mile walk to work and will sell my car in the next year or two. Everything I need is within walking or biking distance and there are multiple Zipcars less than a block away.

Yes, I hear my neighbors at times, but I'm in the middle of a city that I love and don't expect silence. The HOA is strong and I like that I don't need to worry about repairing the roof or other shared spaces. I know that yard work and maintenance just isn't for me. There's no way I could afford a single family home and still stay in the city. If/when my needs change, I can either rent it out or sell and I'm not worried about either due to the location (10 min walk to downtown Seattle, 15 min walk to Amazon HQ, surrounded by hospitals/other large employers).

It all depends on your needs and the strength of the HOA/management of the condo. I couldn't be happier with my choice though.

RexualChocolate

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Re: Are condos always a bad idea?
« Reply #29 on: March 03, 2015, 12:41:57 PM »
Condos are not always a bad idea.  In some markets (north side of Chicago, where I live), they are the only affordable housing.

Hey frugaliknowit, I'm relocating back to Chicago here in the next 2 weeks. I'm renting for another year, but I'd be interested if you had any mustachian-esque units you also considered in the area for a purchase around summer 2016.

I like River North but don't want to pay the premium- would consider Fulton River District and West Loop along with stuff further North. It seems like reasonable stuff is right next to the brand new ultra luxury stuff, so its hard to know where to look.

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Re: Are condos always a bad idea?
« Reply #30 on: March 03, 2015, 12:46:40 PM »
I bought a condo 10 years ago in the Bay Area; it has since appreciated 25%, according to Zillow, and would probably go for even more on the open market, considering the neighborhood and the tight housing situation.

I got lucky - as well as being able to buy the condo at all!, I bought in a small (4 unit) building. We 4 owners ARE the HOA board, and we have never raised our HOA dues. It is a very low-maintenance building in a quiet but good neighborhood.

My one regret is that I don't have a yard - I would love to have a dog, but reading the thread on the cost of pets makes me think I am probably luckier than I realize.

Exflyboy

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Re: Are condos always a bad idea?
« Reply #31 on: March 03, 2015, 12:52:36 PM »
I'm afraid I have an overwhelming reaction when it comes to paying somebdoy so they can tell me what I can and cannot do on my property.

I know some like Condos but I wouldn't touch one with a 10 foot pole.

MrFrugalChicago

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Re: Are condos always a bad idea?
« Reply #32 on: March 03, 2015, 01:16:55 PM »
My first home I ever bought was a condo.

Lived in it for 2 years. Had a seat on the board (treasurer), so had a fair amount of control. Was "annoying", but it also let me live for about half the cost of a standalone house (this was in Chicago).

For the same price, I like freedom - I would always choose a house. But when comparing 400k vs 800k?  I sucked it up and took a condo and made the best of it.

So I think a lot depends on where you are living and what the price difference is. If you get on the condo board, you don't give up a lot of control. You want new flowers? You say "I am going to plant new flowers".. since you are on the board, you are 1/2 the vote.. find 1 more board member to agree with you, and sold.

Very seldom do people really disagree on what to do. Mostly no one wants to do the work. So if I wanted something done, like new flowers.. I said I was going to do it.. then everyone paid for their share of it.

Noodle

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Re: Are condos always a bad idea?
« Reply #33 on: March 03, 2015, 02:14:18 PM »
I think it's a more granular decision than big questions or sweeping answers reflect. Every home choice has some risks (if you choose to rent, you are at risk that the landlord will sell the building out from under you, or raise the rent in big increments. In my fast-developing city with a tight housing market, those are real risks and one of the reasons I finally switched from an apartment to a condo.) In any situation, you are at risk of being stuck with difficult neighbors, short of living on 20 acres of land; in my city, you are also at risk of having something undesirable built next to you that will kill your property values. It just depends on which risks and downsides you prefer.

If you are sensitive to noise or rules, condo living probably isn't for you. If kids or noisy pets are part of your life plans, condo living may not be for you if you get neighbors who are the noise-sensitive ones, especially if you plan to be in a multi-level building. If you want relatively low costs of ownership, easy travel, or the safety of numbers (as a single woman, I prefer to be where other people can see and hear what is going on), it might be. If your complex is in a desirable neighborhood in a city with a strong economy, you're probably going to be able to resell...decent units sell in my city with multiple offers in less than a week. If you are in a small city where most people prefer single-family homes, it's more of a risk.

In a condo you do pay the HOA dues, but you don't pay water, sewer, or insurance or maintenance for the outside landscaping or exteriors. For me, that was a wash.

ohana

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Re: Are condos always a bad idea?
« Reply #34 on: March 03, 2015, 03:55:16 PM »
Great conversation.

We are currently in the process of selling our big house with the intention of downsizing.  We are away all of June and July, and trade housing for a grad student for care of our animals (ie, we dont' make any money on that).  That means we have to pay someone to mow.  Plus, when we get back from our exceptionally taxing gig, the absolute last thing I want to do is paint the house or fix siding or garden.  I want to go have fun and travel and sit on my butt without anyone asking me a question.  But it's Maine, so repairs have to be done.  DH hates this too, and frankly there has been some martial strife due to the pressure to get things done in August.

So for us, a condo is logical.  I understand your point of view perfectly!  Find a nice place with minimal noise from neighbors and a good HOA and you should be fine.  Not perfect; fine.

MrsPete

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Re: Are condos always a bad idea?
« Reply #35 on: March 03, 2015, 07:27:33 PM »
I don't think condos are a bad choice, but I do think you should proceed with caution.  They do carry some of the negatives of apartment living (close proximity to others, problems with parking, bugs, etc.), and I suspect it's harder to find a good condo than it is to find a good house.  However, a well-chosen condo could absolutely be a financially sound choice. 

Bookworm

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Re: Are condos always a bad idea?
« Reply #36 on: March 03, 2015, 10:18:26 PM »
I am torn on this myself. My first home was a condo, and I liked it. The fees were reasonable ($108, if I remember right), and the place was kept up very nicely. The HUGE pros for me are that I like being surrounded closely by other humans (it makes me feel safe), and I dislike yard and exterior maintenance of any kind.

I just don't like the idea of having a payment to make, forever, even when my mortgage is paid off.

Noodle

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Re: Are condos always a bad idea?
« Reply #37 on: March 03, 2015, 10:36:06 PM »
Barring unusual circumstances, you'll be paying water, sewer and insurance on an ongoing basis in your house too, and more likely for landscaping help as you get older, unless you stay in excellent health. Of course in your house, you get to/have to negotiate some of the costs on your own, which could be a plus or minus depending on your perspective.

curlyfry

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Re: Are condos always a bad idea?
« Reply #38 on: March 03, 2015, 11:24:40 PM »
I also really like the feeling of safety being in a condo. Can give out your street address & people still don't really know where you live. Love going inside the outside gate & locking it behind me. If something was ever to happen to my spouse, I would feel a lot more comfortable living in a condo alone rather than a house.

Also if you go away travelling, seems easier to have a condo neighbour check on your place, than in a SFH.

I'd say people are less likely to report the positives of condo ownership than the negatives. But may stem from most people are used to growing up in SFH so the majority still have a preference for that.

dragoncar

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Re: Are condos always a bad idea?
« Reply #39 on: March 04, 2015, 03:07:07 PM »

As others have mentioned, the big thing with Condos is the HOA. I would be less concerned with "wacky" HOA members and more concerned with building finances. The key is to really evaluate the books before closing on the condo. In Illinois, law requires full disclosure of condo finances during the attorney review period -- take this seriously and make sure there are adequate reserves for major repairs such as balcony's or roof. As long as the reserves are there, I really wouldn't worry about anything else. Also -- get on the condo board! My building has to beg to get enough people on the board. It's great being in the loop and having a voice in every capital expenditure.


Many others have said it, but I'll add my voice.  I think condos can be fine, as long as you do all the due diligence on the HOA.  If you fell in love with a house, but the inspection turned up foundation problems, you'd walk away right?  Same with HOA docs/finances.  They shouldn't be an afterthought.  When I was shopping for condos, I always tried to take a look at the HOA docs before even seeing the place in person.

Read all the governing docs, and make sure you understand them.  Read all the financials, and make sure you understand them.  Realize that even audited reserve studies are often a joke with made-up numbers -- make sure what they are budgeting for maintenance really makes sense over the long run.  Read all the minutes, and preferably try to attend a board meeting.  Even if current board members are rock-stars, they can quickly be replaced with duds.  Remember, these folks are not compensated and often have to do a lot of work.  It's easiest to simply sign off on the lowest of three bids when it's only 0.5% your money.  Talk to as many neighbors as possible.

I'd personally prefer a place with rental limitations -- ideally a place with something like minimum 90% owner-occupied but currently 95% owner-occupied.  Thus, if you ever move out you can rent your place out, but you get the benefits of high "pride of ownership."  On the other hand, this limits your resale value because investors won't be bidding on your property.  Also nice if 50% of those owner-occupied are vacation homes, so you get the pool/gym all to yourself and nobody is home on the other side of your bedroom wall.

Often, remodels require licensed contractors, permits, etc.  This makes the DIY remodel more expensive (depending on exactly what you were planning to DIY).

Overall, if you like apartment living, a condo can be a great choice. 

kib

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Re: Are condos always a bad idea?
« Reply #40 on: March 04, 2015, 03:16:25 PM »
The last thing Dragoncar said is what I was thinking: to me, buying a condo was a nice step UP from living in a highrise apartment.  I got to own something and actually I made a killing when I sold them.  The fee included property insurance, real estate taxes and management fees, so a good deal of it was tax deductible and organized in one simple place.  And as a single woman with no home ownership or diy skills, I think I probably saved money and bad contractor experiences by having the HOA arrange repairs. 

It's not the most mustachian home ownership option, choices may be out of your control and more than you would have wanted to spend, but it's a lot less shock than going from renting to outright house ownership.  One of the better real estate decisions I made.

TrulyStashin

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Re: Are condos always a bad idea?
« Reply #41 on: March 04, 2015, 03:44:01 PM »
Just make sure you do your due diligence.  Look at the HOA by laws, finances, history etc.  Both of mine could be better, but they could be a lot worse as well, and there hasn't been any special assessments. 

The answer to your question depends very heavily on the HOA covenants.   If they're badly drafted, look out.   If they're well drafted (clear, concise, no or minimal legalease) and there are safeguards (e.g. a limit on the % increase in dues, annually), then you are likely in a much better situation. 

I'm a lawyer and do some real estate work.  One of my colleagues specializes in writing condo covenants (developers are her clients because all condos start out owned by the developer and s/he gradually cedes control over the community to the HOA over time).   Condo covenants should be tailored to your state law and to that particular development.  If the developer took a short cut and didn't hire a [good] lawyer, or simply reused the covenants from whatever development they did last, then the result can be a disaster.  There is some incentive for developers to do this because by the time the shit really hits the fan, they're usually gone.

If you read them and can't tell whether they're good or bad, then before you submit an offer, it would be worth finding a real estate lawyer to look them over.  Think of it like a home inspection fee -- worth the couple hundred bucks to know what you're getting.

Mini-Mer

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Re: Are condos always a bad idea?
« Reply #42 on: March 04, 2015, 07:53:05 PM »
Condo owner here!  I was wary about condos, since my city is sprawly - single-family houses are the norm and condos in general have a bad reputation.  So far, overall I'm finding it is more good than bad, for my situation.

The downsides:
- There's a lot of inertia in the decisionmaking process - issues often get discussed and then dropped with no decision made, unless they are urgent or someone keeps pushing for a decision.
- The HOA allocates money differently than I would personally (in other words, if it were me I would put in more sweat equity and spend less money on certain things).
- As a group, we (the owners) do not have a coherent philosophy about the HOA fees: are we trying to save for major expenses within the HOA?  or betting on everyone being able to pitch in when we need to replace the roof and/or being gone by the time that happens?   
- Along similar lines, I suspect it will be difficult to push through major improvements to the property (i.e. solar panels, covered parking).
- I can sometimes hear neighbors' dogs or the neighbors themselves.

The upsides:
- Much more affordable than a standalone house in the same area - I can live closer to work.
- My housing costs will still go up (increased HOA fees) but not nearly as fast as rent.  (When I say 'rent', I lived in an apartment complex 1/2 mile away for several years and keep tabs on what that unit rents for.)
- Monthly housing costs are comparable to rent - for more space, more privacy, and more ability to modify the interior.
- I got as much room as I wanted, but didn't buy more space than I needed.
- Professional property management company handles exterior maintenance, utilities, etc.  They are more on the ball than I would be as a standalone homeowner.
- Not a plus for everyone, but something to consider: not all condo units are created equal.  In my building, the inner units are larger, but the end-units have significantly less exposure to neighbor-noise and bigger private yards. 

I have pretty much made peace with not getting to control every expenditure, and otherwise it's a good deal for my needs/wants. 

iris lily

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Re: Are condos always a bad idea?
« Reply #43 on: March 04, 2015, 08:31:40 PM »
I currently own a condo, and I have a comment that I haven't seen anyone else say yet, or at least not in this particular way.  One of the negatives of it is, you are beholden to the decision of the condo association regarding any necessary repairs that come under the umbrella of the association rather than your own individual unit.  Case in point...

This is not unusual.

after seeing friends and relatives in condos, I would not buy one due to these "shared maintenance" issues. They may be decent "investments" in very large North American cities.

dragoncar

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Re: Are condos always a bad idea?
« Reply #44 on: March 05, 2015, 12:08:59 AM »
- As a group, we (the owners) do not have a coherent philosophy about the HOA fees: are we trying to save for major expenses within the HOA?  or betting on everyone being able to pitch in when we need to replace the roof and/or being gone by the time that happens?   


I think this often resolves to: take out debt to fund everything.  HOA services the debt.

This might not be a bad thing, since otherwise your "reserves" are earning 0% interest.  I don't think the board can stick it in an S&P index fund or anything risky.  This lets you pay minimal HOA dues and invest the difference.  Kinda like not paying off your mortgage to invest in stocks.

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Re: Are condos always a bad idea?
« Reply #45 on: April 06, 2015, 02:58:18 PM »
I'll chime in as well, with the same message: It all depends.

Here in NoVA, a condo is the only choice for me and my preferred price range. But here are my caveats to look out for, with anecdotal evidence from my experience:

1. Age of the buildings - Mine is approximately 50 years old and starting to really show its age. And in things that are big and expensive with names like "hot water closed loop line." We replaced a ton of them in the past couple years (with a ~7.5K special assessment) but have another broken one. Right now it is leaking money into the sewer, but we have to wait for foundation repairs to finish before tackling this one.

2. Has the building been maintained over the long haul? My place would be in a lot better shape if they had been more diligent about maintaining it throughout the 90s, instead of playing catchup now.

3. Are the members of the board looking out for you or themselves? I've heard tons of horror stories about this. Everything from new free carpet to cutting down trees because the birds are just annoying. Or spending tons of money in the wrong directions.

4. Does the board/management give the slightest shit about you? I've known several people in my complex that have had to have major work done at the complex's expense due to water damage or major construction. Everyone has been very disappointed in the quality of work and the fact that the contractors outright steal out of every unit. Management doesn't seem to care at all, even though people keep complaining. They continue to hire these same people.

5. How are the financials really? We've had three special assessments over the last eight or so years, due to unforseen construction and unforseen economic collapse. There wasn't any hope that we could have carried on based on our current reserves.

6. How big is the property? I think there is a sweet spot between too big and too small. I want enough people living there that there isn't a scramble if something happens, and related to that:

7. What is covered by the condo With mine, basically everything is covered through the condo. With some, very little is. This can be a good or bad thing.

This all being said, even though mine hasn't been the rosiest, I'll likely get into another condo if I buy again. I think it can be a very cost effective way to live in a city when other housing options aren't anywhere near affordable. But it is a case by case examination.

ShaneD

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Re: Are condos always a bad idea?
« Reply #46 on: May 02, 2015, 01:51:40 PM »
Subbing as another interested party and bumping in the hope of additional opinions.

We're a 2-person household, and most city houses are both too big and too expensive for our needs. It's hard to know how to find the right balance.

dragoncar

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Re: Are condos always a bad idea?
« Reply #47 on: May 02, 2015, 02:18:23 PM »
Subbing as another interested party and bumping in the hope of additional opinions.

We're a 2-person household, and most city houses are both too big and too expensive for our needs. It's hard to know how to find the right balance.

I think we covered the important stuff already, is there a specific additional concern you have?