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Last Updated: May 14th, 2012 - 22:24:01 |
A Condominium now is a hot investment property. Why is that so and what should you know before buying a condominium as your investment home?
Why are so many buying condos as their sure mortgage investment?
Although many cannot afford any conventional home mortgage, they have the small down payment needed and qualify for the low rate mortgage needed for a condo. Yes, these bargain investment homes are increasing in popularity not only because of these low move-in costs, but also because of the minimum maintenance required by the owner.
Yet, even a condominium with a Florida mortgage has two drawbacks compared to the detached single-family investment home. First, condominiums appreciate slower than single-family homes. And condos can involve poor management.
Therefore, before you use that first home loan to purchase a condo for your starter home, make sure that you systematically investigate the condo complex before buying. As mentioned, freedom from extensive home remodeling is a major reason why many are buying condos. Accordingly, your main line of questioning should revolve around the foreseen quality of a condominiums’ upkeep by the homeowners’ association.
A few research starting points when tracking leads. Ask the residents, the homeowners association and your real estate franchise questions about the covenants. Is their adequate guest parking? Boat parking? Security? An outside maintenance company?
Similarly, when questioning real estate leads, ask for the minutes logbook of the condominium association board meetings. These readings will show what the owners of the condo complex have been complaining about; such as the need for remodeling homes’ plumbing systems or other projects that are soon to be voted on by the complex.
About one third of all condo homeowner associations are considered under funded and thus unable to meet major home improvement contracts, and exterior home improvement costs, according to the CA-based firm, Association Reserves, Inc., which studies homeowner associations in most states. As for any exterior home improvement, different condominiums have different regulations as regards to your responsibility as an individual owner versus the responsibility of the association, so buyers should be aware of the restrictive covenants.
Likewise, your condo complex as a real estate investment is only as good as the reserves, which are obtained from your association's reserve study. Once again, the reserves are the funds set aside for exterior home improvement designs in all of the common areas: landscaping, walkways, clubhouses, paving, swimming pools, etc.
Am additionally vital question for your investment real estate is to ask about special assessments. These special assessments are amounts your association has requested over the usual monthly maintenance fee. One example, your monthly fee could pay for painting, gardening, and pool upkeep, but not for that new roof. Thus, you may owe another remodeling home fee.
Also, be wary of the interior remodeling costs that might be needed if you want the peace and quiet afforded by soundproofing. Poor insulation is a major complaint by some condominium owners often due to poor construction. The sound insulation may not block noise from adjoining condos, from airplanes, and from the outside common areas.
Finally, determine how many condo home loans have sold over the last few years. You would hate to compete with numerous newer unsold units should you decide later to sell.
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