Condo purchase advice

[kcowan]

Just curious,

What happens if you buy a condo and 50% of the units are empty due to foreclosures, would you have to pay twice as much HOA fee to cover the empty units?

This is a question that you would get answered by the HOA. Remediation is different by jurisdiction. You need to know what measures are available in case an owner is delinquent on their fees. This applies to existing condos too. Sometimes all they can do is place a lien on title so it does not get resolved until a subsequent sale.

What you want is to find an HOA that can cut off water and power to the delinquent condo owners.

 

[DangerMouse]

I would read the condo minutes before purchase and if I saw that 50% of the units were in foreclosure that would make me question critically the price I was paying.

 

[Martha]

This is a question that you would get answered by the HOA. Remediation is different by jurisdiction. You need to know what measures are available in case an owner is delinquent on their fees. This applies to existing condos too. Sometimes all they can do is place a lien on title so it does not get resolved until a subsequent sale.

What you want is to find an HOA that can cut off water and power to the delinquent condo owners.

Often unpaid fees/assessments are liens with priority over a mortgage.

 

[tryan]

Often unpaid fees/assessments are liens with priority over a mortgage.

True in MA ... varies state to state.

 

[Sparky]

Condo by-laws and rules and regs basically depend on people acting "in good faith". If they don't, i.e, father and son take over the board as president and treasurer (with the idea of paying themselves for services rendered or directing service contracts to relatives (or themselves)), you can be in big trouble as an owner. My lawyer recommended buying ONLY into a complex with over 100 units, that way, if there is a roof needing replacement, there are more owners to spread the expense around. Also, you have a bigger pool of talent to draw from in running for the board. Again, I would recommend buying a condo ONLY if it were the same or comparable price to a SFH in the area. I know I beat this point into the ground, but it is a very, very important point. Sorry, but cheap condos tend to attract loud, undependable and crazy owners and you'll have a higher rent-to-owner ratio and mucho headaches.

 

[beowulf]

Saying that condos should be priced comparably with SFHs does not make a lot of sense to me. Land is most expensive element for a SFH in an urban area. Even the most beautiful condo will be cheaper than a SFH, everything else being equal. What makes them more equal is the high HOA dues in condos - upwards of $1K a month in cities. This, of course, is in addition to any mortgage you might have. Bottom line is that the payments might be equivalent, but the prices will not.

 

[Sparky]

Saying that condos should be priced comparably with SFHs does not make a lot of sense to me. Land is most expensive element for a SFH in an urban area. Even the most beautiful condo will be cheaper than a SFH, everything else being equal. What makes them more equal is the high HOA dues in condos - upwards of $1K a month in cities. This, of course, is in addition to any mortgage you might have. Bottom line is that the payments might be equivalent, but the prices will not.

that doesn't even make sense - a beachfront luxury condo will always be more expensive than a SFH in the same town, BEACH, water, elevators, doorman... No comparison.

 

[Sparky]

Listen, I'm in the Northeast... that's how it is here. Not interested in getting into a pissing match about elsewhere.

 

[IndependentlyPoor]

Based on the posts here and our natural cowardliness about withdrawal rates, we decided against the snazzy high rise and opted to just rent an apartment in a complex near here. It is in the same neighborhood and still within walking distance of restaurants, the post office, and Whole Foods.

These remain scary times. The apartment we will be renting is in a failed apartment to condo conversion project. A very nice, but 1960s era complex was being converted to condos when the developer, then the developer's bank, went bust. Our landlord probably got a screaming deal, but he purchased a not-yet-converted apartment in a complex with lawsuits flying and upgraded it himself. He must have a set of brass ones.

 

[REWahoo]

Based on the posts here and our natural cowardliness about withdrawal rates, we decided against the snazzy high rise and opted to just rent an apartment in a complex near here. It is in the same neighborhood and still within walking distance of restaurants, the post office, and Whole Foods.

I think this is a good move - and I hope your move is good.

 

[bbbamI]

I think this is a good move - and I hope your move is good.

Me too....

 

[Meadbh]

Based on the posts here and our natural cowardliness about withdrawal rates, we decided against the snazzy high rise and opted to just rent an apartment in a complex near here. It is in the same neighborhood and still within walking distance of restaurants, the post office, and Whole Foods.

This is the kind of decision that will make IndependentlyPoor IndependentlyRich!

These remain scary times. The apartment we will be renting is in a failed apartment to condo conversion project. A very nice, but 1960s era complex was being converted to condos when the developer, then the developer's bank, went bust. Our landlord probably got a screaming deal, but he purchased a not-yet-converted apartment in a complex with lawsuits flying and upgraded it himself. He must have a set of brass ones.

Are you renting an upgraded unit, or a 1960s one? Is your landlord part of a syndicate, or working alone? He may have a great investment. Let's hope he has the expertise to manage it properly.

 

[beowulf]

that doesn't even make sense - a beachfront luxury condo will always be more expensive than a SFH in the same town, BEACH, water, elevators, doorman... No comparison.

That's not a reasonable comparison. On coastal FL, there are many condo buildings separated by very nice SFHs - all on the beach. Guess which cost more? The SFHs. Of course the SFHs 10 blocks from the beach may cost less than the beachfront condo, but, all things being equal, the SFH on the beach will still cost more.

 

[IndependentlyPoor]

The landlord is independent and seems to be a nice guy. He got a great deal on the place, but purchased it in foreclosure, before it was upgraded. He upgraded it himself and did a pretty good job. Pergo floors throughout (I am not a fan of Pergo, but infinitely better in a rental than wall-to-wall [-]filth[/-] carpet). Resurfaced the bathtub and installed new countertops. He did not upgrade the cooktop or oven, and that might be a problem.
Now that the dust has settled from the forclosure, similar units are selling for $50K more than he paid.

I worry a little about staying out of the Austin housing market. It seems to continue up and up. We sold our home in a nice part of town in 2005, but prices have continued to soar and now we are priced out of the neighborhoods that we expected to be living in after our travels. Oops.

I admit to being completely confounded by the market. The condo tower we were lusting after
Spring Condominium - The First Point Tower Condo In Austin, Texas
is now selling units at a 20% discount, while at the same time the developer has announced plans for another tower just a few blocks away.
The super lux W
W Austin Hotel & Residences
has decided to leave the condo floors unfinished and just open the hotel part.
The equally snazzy Austonian
The Austonian
will open soon, dumping a load of expensive condos on the market.
Who knows?

 

[REWahoo]

Spring Condominium - The First Point Tower Condo In Austin, Texas
is now selling units at a 20% discount, while at the same time the developer has announced plans for another tower just a few blocks away. The super lux W
W Austin Hotel & Residences
has decided to leave the condo floors unfinished and just open the hotel part.
The equally snazzy Austonian
The Austonian
will open soon, dumping load of expensive condos on the market.
Who knows?

Too bad you can't buy real estate the same way you can stock: put in a limit order at 30% less than today's prices and keep it open until executed (the buy order, not you).

 

[walkinwood]

Based on the posts here and our natural cowardliness about withdrawal rates, we decided against the snazzy high rise and opted to just rent an apartment in a complex near here.

Congratulations on making a decision. And I would like to thank you for starting this very informative thread.

 

[WhoDaresWins]

Yes, thanks for posting the thread Independently Poor. I have been reading it with interest because at some point in my life I might like a condo. Our first home (that we owned, 1979-83) was a three-level townhouse on the Chesapeake Bay in VA with stunning water views, a few steps out to the beach, a swimming pool, nice quiet neighbors and an attractive clubhouse. I really liked the lifestyle and would consider condo living again in the future. The condo that we owned back then was comparable in price to a very nice much larger house in the Hampton-Newport News-Poquoson area.

 

[endthefed]

i own two condos in a beach town that i vacation rent.

#1 = reserve fund. should be in the hundreds of thousands (for 100 condos)

#2 = bank owned units (they are exempt from a lot of the expenses) = more expenses onto REAL owners

#3 = visual inspection is vital. you can see a lot of problems that will be coming your way via special assessments

#4 = high percentage owner occupied. owners keep a tight leash on management. retirees are the best! also factors into loans from banks -

 

[youbet]

#4 = high percentage owner occupied. owners keep a tight leash on management. retirees are the best! also factors into loans from banks -

I wouldn't own a condo for personal occupancy unless it is in an association where rental is forbidden. I say this from personal experience helping my MIL with her condo issues. As soon as the board changed the by-laws to exclude renting your unit and the two year grace period ended, the majority of the issues the association was having ended. It's nice there now. Units occupied by their owners, mostly retirees, desiring a conservative "no surprises" operation.

There seemed to be two issues with owners renting their units:

1. Some of the owners did not screen tenets well and there were some real nut cases in residence causing real problems.

2. The landlord owners seemed to have a different agenda than the owners who occupied their own units.

 

[Sparky]

i own two condos in a beach town that i vacation rent.

#1 = reserve fund. should be in the hundreds of thousands (for 100 condos)

#2 = bank owned units (they are exempt from a lot of the expenses) = more expenses onto REAL owners

#3 = visual inspection is vital. you can see a lot of problems that will be coming your way via special assessments

#4 = high percentage owner occupied. owners keep a tight leash on management. retirees are the best! also factors into loans from banks -

Exactly right! I learned that the reserve should be at least $1,000 per unit. That's one of the biggest tips as to whether the association is run properly and a real indication of its financial health.

High percentage of owner occupied - just right. Don't know how you can find an association with no rentals allowed. Probably wouldn't want to be there anyway - what if you, as owner, needed to rent your unit?

One caveat - walk around and talk to more than one owner - you don't want to base your judgment on one crank or one local crazy, who hates everything.

 

[Sparky]

That's not a reasonable comparison. On coastal FL, there are many condo buildings separated by very nice SFHs - all on the beach. Guess which cost more? The SFHs. Of course the SFHs 10 blocks from the beach may cost less than the beachfront condo, but, all things being equal, the SFH on the beach will still cost more.

Obviously, a waterfront SFH will be worth more than a waterfront condo in the same location. However, a waterfront condo will usually be worth more than a SFH that is not in a waterfront location elsewhere in the same town.

 

[Brat]

We purchased in a building were rentals are not allowed, largely retirees, with substantial reserves. A BORING building. Great place to live.

 

[tryan]

2. The landlord owners seemed to have a different agenda than the owners who occupied their own units.

I've owned and rented out a few condos ... #2 is why I'll never buy another condo for rental. Managing maintenance costs by committee is a fools game.

 

[haha]

I've owned and rented out a few condos ... #2 is why I'll never buy another condo for rental. Managing maintenance costs by committee is a fools game.

In many west coast states at least the basic format is getting laid down in legislation and supervision. I have been looking at condos to live in, and the better ones all have very detailed 20 year budget plans for maintenance and capital projects, as well as sources and uses of funds over that time. I believe that California is in the vanguard of this movement, and Washington last.

I somewhat disagree with another poster's preference for buildings with many older residents. I have seen two co-ops where the board recently turned over from people born in the depression years to boomers and younger. Both of these places have completely turned around a situation of neglect which came about because there were too many voters who just wanted to live there until they died, and did not want to spend anything on upkeep beyond responding to emergencies.

One in particular is a 120 unit building with a very energetic new president and treasurer, as well as an excellent onsite manager with an office open normal business hours who even gets a unit to live in. His job is fully professional with health insurance, 401 K etc. For a typical middle income retiree, I think it helps toward commonality of purpose if the residents are not extremely wealthy, or using their units as 2nd or third homes

Too many places are too small, or do not want to take on the expense of doing it right and soon you are living in a dump.

I also doubt the contention that it costs less to maintain a SFH than one's share of a condo. Maybe if you are victim of catch-up costs, but otherwise, start to think about all the costs both monetary and in time and trouble of maintaining a home in anything like saleable, good condition. Painting or brick and trim maintenance, roof leaks, foundation or plumbing problems, untold hours trying to get craftsmen who are really craftsmen and not just drunks temporarily sober until they tear up your kitchen, or alternatively spent running back and forth to one of those horrible home supply stores, doctors bills for when you fall off a ladder or slip on the roof or cut your hand clearing debris after a storm, and on and on and on. And then there are mower repairs, blah, blah, blah. Last, a typical urban mid or high-rise building has less mandscaping than a typical urban SFM. So 120 people are paying for roughly the same amount of gardening that one would be paying for in a SFH.

Further, the condo or co-op has much more bargaining power and management time when putting out bids for maintenance or capital improvements, overseeing the job, and seeing to it that it is properly insured and completed.

I only need to keep my apartment clean and neat, and keep up on car washing and maintenance. All my other time can be spent doing the many things that I enjoy, which does not include home fixups.

A condo would be more maintenance intensive than a rented apartment, but in a well chosen one I think it might not be a whole lot different. I am trying to avoid units without community laundry rooms. I really do not want washer and dryer, especially when shoehorned into a small closet. I know that W&D in the unit is a selling point, but that holds both coming and going and once I buy I do not expect to go anywhere voluntarily. Same with water heaters- when I can get it I prefer hot water from a central boiler.

I realize of course that some people really love this stuff, and for them the comparison would be different. And for some there is the problem of too many humans in the environment, or of sometimes not being able to have dogs and cats.

Ha

 

[kcowan]

...I really do not want washer and dryer, especially when shoehorned into a small closet. I know that W&D in the unit is a selling point, but that holds both coming and going and once I buy I do not expect to go anywhere voluntarily. ...

We have one of each: shoehorned into small closet in our Mexico condo, and shared with four other penthouses up north. The shared one is far more effective and conflicts are never a serious problem. But it remains an emotional issue, especially for the washer-person.