For first time buyers the lower prices make entry into the real estate ownership market easier. For Seniors, the low maintenance aspect is very beneficial to them, and there is a sense of security knowing they have neighbors so close.
For Empty Nesters or Silver Singles it is often a great way to downsize without downgrading, and is great for those who love to take off and travel often.
So How Do Condo's Work?
When you purchase a condominium, you purchase and have title to your individual unit, and share in the ownership of the land and other common property with the other owners. The type of common property varies depending on the type of condominium - a high rise or townhouse - examples of common property would include hallways, elevators, heating system, parking structures, landscaped areas, recreation areas etc.
A condominium is a specific form of ownership and does not describe a type of building.
One of the advantages to owning a condominium is that in most cases, it is owner-occupied and owner run by way of a condo association and condo board. Owners often have the opportunity to be involved if they wish. This type of ownership tends to create a sense of community and extra care in the entire property because it is your investment.
What are the Advantages and Disadvantages of Owning a Condo?
No or low maintenance, is probably one of the biggest advantages. If being a snowbird is part of your lifestyle, you can leave with your mind at ease, just lock the door and don't worry about what winter brings, the snow removal happens whether you are there or not. In the summer the grass will be cut, the lawns will be watered, and you won't have any exterior painting projects or fence repairs to look after.
monthly cost of owning is often less than renting
cost is often less than single family home due to efficient use of land and economies of scale
easier entry for first time home buyers due to price
wide range of property types, prices, locations, sizes and amenities available
pride of ownership, freedom to make interior changes as you wish (not exterior, we'll get to that)
enhanced security availability and peace of mind when leaving unit unattended
exterior maintenance and upkeep is relatively minimal or eliminated
sense of community due to permanence of residents and resulting social activity
some developments are geared to a specific lifestyle (restrictions on age, pets, children etc.) to suit your specific preferences
very marketable if you do choose to sell
some loss of freedom may be experienced due to rules and by-laws e.g. type of pets allowed, right to rent unit etc.
due to a larger concentration of people you may experience problems with the "5 p's”, pets, parties, parking, personality and people.
you may be paying for some amenities you never use
boards of directors vary in terms of skill and effectiveness
I Have Heard Horror Stories About Owning a Condo...Are They True?
Unfortunately, some were true. Condos ended up getting a bad rap for a while because there was not very strong regulation in place and some of the condo boards were poor business operators or worse yet, crooked. That has all changed. Now, there are very strong regulations in place that mandate how condo associations must operate.
There are some things to pay special attention to when purchasing a condo, and hopefully your real estate agent will guide you in this process.
As a unit owner you will be responsible for your share of expenses known as common element fees or common expenses. These are set out in the condo declaration. It describes what expenses are to be shared and in what proportion. This can be equal or unequal based on the comparative size of the units.
The exterior and common area maintenance of your condo is covered by your condo fees. The fees are usually paid monthly in accordance with the budgeted expenses. Condo fees vary in price often reflecting the luxury and amenities of a building, such as a swimming pool, gym, on-site security personnel, etc.. Your condo fees are over and above, and separate, from your mortgage payment.
Reserve Fund...This is Important.
This is where the horror stories came from...from mismanaged or nonexistent reserve funds. The reserve fund is like a savings account for future repairs. In the past, when condo corps were not allocating a small portion of the condo fees collected every month to build a reserve fund, they had no way of paying for repairs when they were needed. This in turn resulted in large assessments, or basically a large unexpected bill, to cover your portion of the repair cost to the building. It was not good. As I said, it is no longer like that, Reserve Funds are mandatory, and there is a lot of regulation in place now.
Reserve or contingency funds are set up by the condominium corporation to cover major or unexpected expenses. The developer of a new condominium usually sets up a fund which is then turned over to the condo corp. The fund becomes an asset of the corporation and each year the unit owners decide on what the level should be. The individual owner does not have any rights to the Reserve Fund. Most condo corps have to have an estimate of repairs expected in the next 5, 10, and 25 years so they can properly save and budget for them without large assessments.
Always ask to see the condo documents, and be sure to look at the reserve fund plans.
By-Laws are the rules that are set out for the building or development and you must follow and obey them. They are provided as part of the condo documents and it is important that you read them and feel that you can live by them. Be sure to ask your agent for the complete set of building rules and regulations before finalizing your offer on a condo...you can have it put in as a condition of the sale. Read the by-laws. It may seem overwhelming at the time, but these are the rules you are going to need to function within.
Are there any restrictions you require or don't want like pets, children, age, number of people per suite, carrying on business in a suite, ability to rent your suite? Most condos have a long list of association rules and regulations by which you'll have to agree to abide by if you purchase in the building.
Other Questions to Consider...
Lifestyle - Does this suit your personality and lifestyle?
Design and Layout - Downsizing can be good, but be realistic, make sure the design and layout work well for you.
Expenses - What do the monthly expenses look like, you will probably be pleasantly surprised, but ask, be sure you know what to expect
Quality - It is really important that the building is built well and has been maintained and is in good repair.
Parking and Storage Facilities - What is available? Is it enough to accommodate everyone? Where is guest parking?
Owner Occupied vs Rental - Owner occupied is preferred because owners usually take pride in their property, where as renters are usually less concerned about the property or the neighbors...remember the 5 P's.
Security - Is the area gated? Will your vehicle be indoors or not? Is it safe?
Maintenance - Does the property appear well maintained? Will things get fixed quickly?
Condos can be a great housing solution. It is one of the fastest growing trends in housing throughout all major cities, and provides a lot of solutions for all different demographics. If you are considering a condo, it is something you can confidently pursue, but do it with your eyes wide open. Know why you are choosing a condo, be realistic about your needs, know you will need to follow the community rules, and make sure you can be a good neighbor.
Lastly, ALWAYS read the condo documents before finalizing a purchase contract. It is required by the selling agent to provide these documents for your review. Read them.
If you are considering buying a condo, give me a call, I would be happy to help you navigate the process.
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