5 questions to ask before buying a condo
1. How much freedom do you need?
If you travel frequently and don't like to handle yard work or routine repairs, a condo may still be your best bet, analysts say. Your association dues in a condo cover most of the upkeep, and the close proximity with your neighbors allows them to keep an eye on your place when you're gone.
However, buying into a condo also means less freedom to paint or decorate things the way you want. And lobbying the board for improvements can be a lengthy political process. Are you prepared to fight for those new pool chairs?
2. Do you foresee moving in the next five years?
While condo prices are cooling in many markets, they are bound to bounce back in the long term, experts say. If you can afford to stay in a property for five years, it will almost certainly appreciate in value. On the other hand, if you are looking to flip a property or you might need more room in a year or two, a condo might not be the best choice, said Michael Carliner, economist with the National Association of Home Builders.
3. Are condo fees reasonable and affordable?
Your mortgage payment is just one part of the monthly tab for a condo. Monthly association fees, which are not tax deductible, also are required to provide for landscaping, painting and other upkeep. In a recent survey by the Community Associations Institute, 30% of respondents belonging to homeowners and condo associations reported paying $101-$300 per month in association fees. Can you afford this expense?
Additionally, consider whether the development has sufficient reserves to cover big repairs when they're needed. Almost 40% of the CAI's survey respondents reported paying $50 or less in fees per month. While a low payment might look attractive, said the National Association of Realtors' Walter Molony, it can often cost you down the road.
4. Is your local market strong?
How have prices for condos fared in your area? Are they going up as strongly as single-family housing? Where is your city, and even your ZIP code, in the real estate cycle? Is there plenty of land for development? While condos in some land-scarce markets continue to appreciate, other markets appear to have peaked and it could take years for supply and demand to come back in balance.
5. Is this an investment or a lifestyle choice?
Over the long haul, condos do not appreciate as much as single-family homes, Carliner said. On the other hand, condos in many urban areas are much more convenient to shops, entertainment and other amenities. Are you willing to give up some appreciation to save money on gas and eliminate that long commute?