Thoughts on condos?

[malibuboats91]

Hi all - I’ve been looking for a house but in the area I’d like to buy an old outdated home goes for $275-350k, which seems to be out of my price range even if I pay 20% down. This led me to think about buying a condo. I could get a decent condo for $150-200k, but HOA fees are $300/mo. Considering I pay $1,040 for rent currently what are your thoughts? I’m inclined to continue renting my small 1br apartment but find myself wanting a yard for a dog, garage, office, etc.

Financial data as follows:
Age: 28
Salary: $70k
Cash: $72k in various accounts
Investments: $69k
Debt: $0

[Flyer24]

Topic moved to Personal Finance.

[Kelrex]

I don't think condos are a great idea if it's that you can't afford something you really want. Between condo fees and special assessments, it can be quite costly depending on how well run it is...usually by a group of unqualified, nutty volunteers at that.

I love my condo, but that's because I love not being responsible for a lot of the bigger maintenance. I have no interest in gardening or renovating the outside of my home, and I love never having to replace a roof or worry about a furnace, and that someone else shovels the snow. I also love having a pool that someone else worries about maintaining.

It's more of a lifestyle decision, which can be a horrible decision if it's not right for you.

If you can rent a decent place for less than a condo+fees and if you really actually want a detached home, then don't get a condo.

[sailaway]

I love condo living and first bought one after having a really crappy landlord.

However, I now rent a condo because that is what makes financial sense where I am, especially given that I don't expect to be here more than a few years.

If you had your heart set on a yard and such, have you looked at renting a single family home?

Do the math. A good calculator/calculation will help you figure out how long you have to stay there to make it worth your while. I compared two units in the same community and realized it would take four years until just taxes + rent + HOA would be less than rent, never mind the other costs. I ran the calculation again after two years with the new selling prices for appreciation and my new rent. We are will still be ahead for a while, and I credited the condo with appreciation, while not figuring in the gains for the money sitting in VTI instead of equity.

If you can rent for $1040 vs buying at $150k+, you will likely be better off renting, but you need to run the actual numbers for your area.

[malibuboats91]

I don't think condos are a great idea if it's that you can't afford something you really want. Between condo fees and special assessments, it can be quite costly depending on how well run it is...usually by a group of unqualified, nutty volunteers at that.

I love my condo, but that's because I love not being responsible for a lot of the bigger maintenance. I have no interest in gardening or renovating the outside of my home, and I love never having to replace a roof or worry about a furnace, and that someone else shovels the snow. I also love having a pool that someone else worries about maintaining.

It's more of a lifestyle decision, which can be a horrible decision if it's not right for you.

If you can rent a decent place for less than a condo+fees and if you really actually want a detached home, then don't get a condo.

I love condo living and first bought one after having a really crappy landlord.

However, I now rent a condo because that is what makes financial sense where I am, especially given that I don't expect to be here more than a few years.

If you had your heart set on a yard and such, have you looked at renting a single family home?

Do the math. A good calculator/calculation will help you figure out how long you have to stay there to make it worth your while. I compared two units in the same community and realized it would take four years until just taxes + rent + HOA would be less than rent, never mind the other costs. I ran the calculation again after two years with the new selling prices for appreciation and my new rent. We are will still be ahead for a while, and I credited the condo with appreciation, while not figuring in the gains for the money sitting in VTI instead of equity.

Thanks for the replies! I honestly like yard work and snow removal. In quarantine I’ve been staying with my parents quite a bit and do all theirs, always did as a kid.

As far as numbers, if I’d buy a $200k condo when you factor in Interest, insurance, HOA and RE tax it ends up being maybe $50/mo less than what I currently pay in rent. In total the payment is $1,280 vs $1,040, so I’m really only building <$300 in equity per month.

[stan1]

There are many types of condos. High rises, condos that look and are designed like apartments, condos surrounded by park-like landscape, condos that are more like townhouses in design.

If you do buy a condo I would get at least 2 bedrooms which tend to hold up better in resale. Also I would not buy a condo unit that "feels like" and looks like an apartment.

Agree you might want to consider renting a condo or small house in the area you like with a yard if that is important.

[Lee_WSP]

Whatever you choose, you have to live there for about 10 years to make owning make sense over renting. So, you need to ask yourself if you're willing to sign a 10 year lease on the property you're looking to "own".

[BogleMelon]

A lot of factors to decide which make sense on the long run. This is a useful calculator: https://michaelbluejay.com/house/rentvsbuy.html

Watch out, most of these factors are future related (rate on investment had you invested the downpayment and rented..etc). It is impossible to know the future in advance, so this calculator (and others) should be taken with a grain of salt

[Dottie57]

I have lived in the Same condo since 1987. I have enjoyed the no outside maintenance living. I have an end unit - fewer shared walls. I enjoy being able to decorate without getting permission (paint).

You do hear your neighbors at times. You do have rules which need to be followed. You may not agree with every decision by the HOA board. But you can pack up and leave at any time without a lot of worry.

[michaeljc70]

If you really don't want to do any work then renting or a condo is great. That doesn't seem to be you. Maybe you can split the difference between a house and condo with a townhouse? They often have a yard and are less expensive than SFHs. I view HOAs as a necessary evil if you cannot afford to avoid them (buying a SFH) and/or you really don't want to do any maintenance (or bother hiring it out). I live in a very urban environment so HOAs are everywhere.

[sean2724]

I wanted a house (initially) and ended up in a condo. I've come to LOVE the lifestyle - and there's a lot you can do in a small space. Maybe not for dog people though. You can get a lot of extra time to enjoy life. A lot of houses in my area just dont have the features I'd want or to an extent to justify the huge markup. We also have family who showcase the pitfalls of single family homes for us. Ultimately our condo was cheaper than renting something comparable in our area.

Your dues (should) pay for maintenance. It's a positive feature that you're forced to budget for that stuff. In a house you still need maintenance - it's just up to you to pay 100% and plan ahead (which a lot of people don't do). Consider it a stealth cost. Another condo plus is you split risk regarding major issues or repairs - assuming the HOA is run well.

You should brush up on your politics if you're going to live in a condo. I feel it's a HUGE mistake not to be involved. You'll pay someone to rake dirt otherwise - ask me how I know. Dont count on the HOA minutes to hint at issues. Take a second look at the reserve study. Expect disagreements about how to run things. Some people are all about monthly services and appearances. Others want plenty of money saved up to avoid special assessments. If there's lots of turnover, you have to be careful that someone is looking out for the big long term costs like painting and the roof.

After 2 years I came to understand the HOA president at my condo had a personality disorder. He was retired and acted like a dictator. He once sent a 2am "wall of text messages" where he threatened to rent his condo to a horrible person to spite me (because I wanted a pink dogwood tree in front of my condo instead of the tree type he wanted in front of my condo). It was insane - and that was just the tip of the iceberg. If you don't have the votes (because people don't show up) it becomes challenging to check someone like that.

It takes a lot of politics and patience to fix HOA issues. But it can be done. You end up spending more time than you thought building relationships with neighbors (to ensure things are run well) if you're in it for the long haul. I've built friendships along the way. The cost of having to step up is it erodes the 'hands off' selling point of the condo to an extent.

Just some thoughts...

Oh I like yard work too and DIY aspects of home ownership. You know what else I like? Doing anything else with that time. Or nothing!

[boogiehead]

I bought my first condo around your same age and don’t regret it one bit. I had a similar dilemma like you in which I wanted to buy a place however I couldn’t afford a nice SFH alI I could afford was a old fixer upper, but with a condo I was able to get a fairly new place in a great location that eventually blossomed.

Buying the condo helped me understand the process of home ownership which I thought was priceless at an early age, such as getting a mortage, finding a good real estate agent, negotiating price (I bought it during the last recession and it’s funny how badly the entire real estate industry does not want the devalue the property), I was negotiating for a 5k discount on the selling price and the seller refused but was willing to give HOA credits which equated to 5k.

Now the cons, is that in a shared living environment you can’t control what your neighbors do so getting a bad neighbor could really affect your quality of life there and HOA fees which you can’t control which will usually go up.

In terms of what makes a good condo to buy/invest .... location location location (of course you can say this about all properties) but I feel condos are even more important because that’s one of the main selling point of a good condo is having easy access to amenities (restaurants, market, etc...) hopefully walking distance, a good HOA company that runs the place that is accessible and willing to enforce the rules. Anyways this is just some take aways i’ve learned from buying my condo I eventually bought another one and both of them worked out for me.

[Mr.BB]

If you do choose a condo make sure you spend some time reviewing their association meeting notes before you buy. You can learn a lot about how they run their condo by those notes.

[lifeisinmirrors]

If you do choose a condo make sure you spend some time reviewing their association meeting notes before you buy. You can learn a lot about how they run their condo by those notes.

Agree, and the financial statements too. If they're spending more than they're taking in, HOA dues are about to go up.

[Kelrex]

I don't think condos are a great idea if it's that you can't afford something you really want. Between condo fees and special assessments, it can be quite costly depending on how well run it is...usually by a group of unqualified, nutty volunteers at that.

I love my condo, but that's because I love not being responsible for a lot of the bigger maintenance. I have no interest in gardening or renovating the outside of my home, and I love never having to replace a roof or worry about a furnace, and that someone else shovels the snow. I also love having a pool that someone else worries about maintaining.

It's more of a lifestyle decision, which can be a horrible decision if it's not right for you.

If you can rent a decent place for less than a condo+fees and if you really actually want a detached home, then don't get a condo.

I love condo living and first bought one after having a really crappy landlord.

However, I now rent a condo because that is what makes financial sense where I am, especially given that I don't expect to be here more than a few years.

If you had your heart set on a yard and such, have you looked at renting a single family home?

Do the math. A good calculator/calculation will help you figure out how long you have to stay there to make it worth your while. I compared two units in the same community and realized it would take four years until just taxes + rent + HOA would be less than rent, never mind the other costs. I ran the calculation again after two years with the new selling prices for appreciation and my new rent. We are will still be ahead for a while, and I credited the condo with appreciation, while not figuring in the gains for the money sitting in VTI instead of equity.

Thanks for the replies! I honestly like yard work and snow removal. In quarantine I’ve been staying with my parents quite a bit and do all theirs, always did as a kid.

As far as numbers, if I’d buy a $200k condo when you factor in Interest, insurance, HOA and RE tax it ends up being maybe $50/mo less than what I currently pay in rent. In total the payment is $1,280 vs $1,040, so I’m really only building <$300 in equity per month.

N'ah dude, you forgot to account for mortgage interest, insurance, maintenance, likely more utilities, and possible special assessments.

It's never just rent vs mortgage+property tax+condo fees

[Kelrex]

There are many types of condos. High rises, condos that look and are designed like apartments, condos surrounded by park-like landscape, condos that are more like townhouses in design.

If you do buy a condo I would get at least 2 bedrooms which tend to hold up better in resale. Also I would not buy a condo unit that "feels like" and looks like an apartment.

Agree you might want to consider renting a condo or small house in the area you like with a yard if that is important.

Unless that's what someone wants.

...says the person who owns an apartment, and used to own a townhouse, lol.

[michaeljc70]

If you do choose a condo make sure you spend some time reviewing their association meeting notes before you buy. You can learn a lot about how they run their condo by those notes.

Agree, and the financial statements too. If they're spending more than they're taking in, HOA dues are about to go up.

And look at the reserves and how they compare to expected reserve expenses. Sometimes very old data is used for reserve calculations. You cannot buy windows in 2020 what you could in 2005. Most allow for inflation but some things have gone up much more than inflation.

We are being hit with a $5k+ special for stucco repairs. There will be another for brickwork repairs. Our reserves don't cover those items. They expected them to last 40 years and they only lasted 20 years. Developers often low ball initial reserve calculations to make the assessments low to sell all the units easier.

[fyre4ce]

Currently renting a condo. Not a fan. It was built recently and we discovered lots of problems due to sub-standard materials and construction. HOA fees have steadily gone up. The property management company had issues and was recently changed. The HOA board tends to attract people who like getting involved in others' business (the last thing I want to do in life is yell at people for parking in the guest parking too long, but this sort of thing gets other people's juices flowing, apparently). And you're right on top of other people - need to put a mask on to take out trash, unpleasant smells from neighbor's grill fill our unit, etc. No yard. Others may like this living arrangement more, but we're looking for a single family house for our next place.

[Mr.BB]

If you do choose a condo make sure you spend some time reviewing their association meeting notes before you buy. You can learn a lot about how they run their condo by those notes.

Agree, and the financial statements too. If they're spending more than they're taking in, HOA dues are about to go up.

+1

[k b]

Currently renting a condo. Not a fan. It was built recently and we discovered lots of problems due to sub-standard materials and construction. HOA fees have steadily gone up. The property management company had issues and was recently changed. The HOA board tends to attract people who like getting involved in others' business (the last thing I want to do in life is yell at people for parking in the guest parking too long, but this sort of thing gets other people's juices flowing, apparently). And you're right on top of other people - need to put a mask on to take out trash, unpleasant smells from neighbor's grill fill our unit, etc. No yard. Others may like this living arrangement more, but we're looking for a single family house for our next place.

I was going to say, "rent a condo for a year to find out how you feel". This post is a good starting point.

Living in a condo is not all bad, but the point to note is that your neighbours would change much more frequently than if you live in a house. This affects everything about your daily life and how tolerable your condo life is.

[sometimesinvestor]

I own and have lived in a townhouse condominium for almost 40 years> I am happy with the lifestyle(I am not very handy and glad I don't have to fix the roof or paint the building but the property has appreciated much less than single family houses. If price appreciation isa factor in your purchase decision you should investigate this aspect of ownershIP

[heyyou]

First, rent the type of dwelling that you are considering, in or near the neighborhood, before you buy. Some commutes are worse than others, or there is a busy fire station nearby, etc.

My condo was very near a high school so the kids came there on weekdays to smoke off-campus, then peed in the elevator. This was decades before security cameras. The school was closed when I was looking at the new condo construction on weekends. My condo sold for more than half of what I paid for its newly-built price, but that was after a major real estate crash followed by two digit mortgage rates. It depreciated like a new car.

Rent first, to learn more about the neighbors, the neighborhood, and even the homeowners' association, if possible, whether buying a condo or a house. Living in the neighborhood or the condos, you may hear of someone who wants to sell.

[LittleMaggieMae]

Be aware the mortgage interest rate might be higher on a condo/townhouse.

I would be a little hesitant to buy a condo/townhouse that was built/first sold right before/during the Housing Bubble popped in your area (2000-ish thru 2009-ish). It was a little "wild west" for awhile and some shoddily built properties got built. I've read how it was falling to the current condo/townhouse owners of the buildings to pay for the repairs or replace shoddy building materials (or take the builders to court).

I would NOT buy a one bedroom/1 bath condo (unless you were buying in a high rise building with a view/amenities in a happening hot spot city). I would go with a 2 bedroom/2 bath condo. Maybe I'd go 3 bedroom if the price was right and the 3rd bedroom wasn't basically a closet.

My nieces/nephews have rented condos and apartments and a split floor plan seems to be attractive - a bedroom and full bath with a "master bedroom and full bath" on opposite sides of the unit - good for having room mates or some privacy if you have kids.

I would also want a washer/dryer in the unit. Even better if the unit was originally designed to have a washer/dryer - not a "remodel" or "update" to the unit.

I would avoid buying a unit in a building that was originally built as apartments. Buildings/properties that were built for individual owners sometimes have better 'soundproofing' and layouts for privacy. Apartments are built to house people for a year or two at a time. People who rent apartments may tough out a year (until the lease ends) if there's a lot of noise from the other units. When you own and live there you don't have that luxury. FWIW: I'd ignore my advice if I was buying vintage (1950's and earlier) that meet my criteria/needs.. cause I really like vintage buildings and would be willing to put up with some inconveniences.

When looking at properties with pools and tennis courts or other community stuff - really think about how much you will use those amenities. You will be paying for them thru you HOA fees. Do you really want to pay for a pool you will never use? If knowing you COULD use it or being able to say you have a pool brings you joy then it's a non-issue and worth the cost.

[malibuboats91]

Thanks for all the responses! I kind of think I’m best holding out for a house. I hate throwing $1,040 out the window every month but think a condo may bring some annoyances and know I don’t want to get involved in the condo association. Does this seem reasonable or if I’m thinking a condo is all I can afford for the next 5 years should I look more into condos?

[sailaway]

Rent isn't throwing money away. It is saving you taxes, fees and maintenance.

If you want to own more quickly, consider getting a roommate or otherwise getting creative with housing.

[Watty]

Age: 28

One thing that has not been mentioned is that at this stage of your career you will likely be changing jobs periodically. One huge risk with buying a condo or a house is that your next job may not be in a good location for where ever your property is.

You could have a great job opportunity in some other city too.

There have been a number of times when I have seen promotions or job offers go to someone in part because they could easily relocate. In one extreme case someone got a rare opening to be promoted to to fill an unexpected urgent opening for a facility manager because it was a Wednesday and he could be there Monday morning. He came back later on to pack up his apartment.

[Kelrex]

Rent isn't throwing money away. It is saving you taxes, fees and maintenance.

If you want to own more quickly, consider getting a roommate or otherwise getting creative with housing.

Agreed.

A lot of the time owning means throwing away a lot more money. The NYT rent vs buy calculator is a huge help on this front.

In my city, renting saves a fortune compared to buying. Most of the condos here couldn't possibly be rented for enough to cover full cost of a new mortgage+property taxes+insurance. There are a lot of upscale shoe boxes here going for 400K+, but I can't imagine a one bedroom renting for over $2000.

The comment about the one bedrooms and amenities are both really important. The resale market for one bedrooms is pretty small unless you're in a crazy desirable area in a building with great amenities, because that will attract the young, single professionals who desperately want to break into the housing market, but have a cool place. Otherwise the one bedrooms are kind of the dregs of the market, which I say as someone who opted for a one bedroom that was much cheaper than a two bedroom, even though it is the same size and has a better layout.

Regarding those amenities, as said above, you have to use them. A pool is nice, but not if you are paying for others to use it. Be realistic. Most condo pools are used by like, 4 people, and the rest of the residents are subsidizing their use. Those hard structure amenities can't be gotten rid of either. The condo board can't just say "well, no one uses the pool, so let's stop paying for it", it's not a gym membership.

I specifically wanted an indoor pool, it's the main reason I moved. SO and I used it all the time, and yeah, about 3 or 4 others do as well. We frequently say a thank you to all of our hundreds of neighbours for pitching in for us to have a giant pool that we can use in the winter.

[Kelrex]

Age: 28

One thing that has not been mentioned is that at this stage of your career you will likely be changing jobs periodically. One huge risk with buying a condo or a house is that your next job may not be in a good location for where ever your property is.

You could have a great job opportunity in some other city too.

There have been a number of times when I have seen promotions or job offers go to someone in part because they could easily relocate. In one extreme case someone got a rare opening to be promoted to to fill an unexpected urgent opening for a facility manager because it was a Wednesday and he could be there Monday morning. He came back later on to pack up his apartment.

Yeah, that's another factor.
Renting buys you freedom.

[LittleMaggieMae]

Thanks for all the responses! I kind of think I’m best holding out for a house. I hate throwing $1,040 out the window every month but think a condo may bring some annoyances and know I don’t want to get involved in the condo association. Does this seem reasonable or if I’m thinking a condo is all I can afford for the next 5 years should I look more into condos?

1st, paying rent isn't "throwing money out the window" - you need someplace to live, renting gives you flexibility. You also don't have to do repairs to the unit. You also don't have many of the costs/hassles of living in one place a long time (You do not have to clean the carpeting, paint walls, clean hard to reach light fixtures, etc.. when the stove fails you don't have to figure out which new one to get or worry about the cost. You get to move away when your lease is up.

I think you should look at condos/townehouses AND houses while you are saving money towards buying.

I have friends who live in a condo (11th floor) and in townhouses (two have end units in two very different suburbs, and a couple have middle units in still different suburbs (one overlooks a golf course - another overlooks a forest preserve/nature area). All are very happy with their choice and lifestyle. I own a townhouse (but rent it out) - it's one of Four units ( 2b/2b) under one roof. Each unit has a private entrance and patio - in a subdivision with 30 other buildings exactly like the one my unit is in. Units sell quickly when they do come on the market. Nothing wrong with this type of housing... you just need to do your homework and leg work to find the unit that's best for you. Many of the issues with condos/townhouses are the same for houses.

I'd throw a wider net and look at a variety of housing options.

[7eight9]

Rent isn't throwing money away. It is saving you taxes, fees and maintenance.

If you want to own more quickly, consider getting a roommate or otherwise getting creative with housing.

Agreed.

A lot of the time owning means throwing away a lot more money. The NYT rent vs buy calculator is a huge help on this front.

In my city, renting saves a fortune compared to buying. Most of the condos here couldn't possibly be rented for enough to cover full cost of a new mortgage+property taxes+insurance. There are a lot of upscale shoe boxes here going for 400K+, but I can't imagine a one bedroom renting for over $2000.

The comment about the one bedrooms and amenities are both really important. The resale market for one bedrooms is pretty small unless you're in a crazy desirable area in a building with great amenities, because that will attract the young, single professionals who desperately want to break into the housing market, but have a cool place. Otherwise the one bedrooms are kind of the dregs of the market, which I say as someone who opted for a one bedroom that was much cheaper than a two bedroom, even though it is the same size and has a better layout.

Regarding those amenities, as said above, you have to use them. A pool is nice, but not if you are paying for others to use it. Be realistic. Most condo pools are used by like, 4 people, and the rest of the residents are subsidizing their use. Those hard structure amenities can't be gotten rid of either. The condo board can't just say "well, no one uses the pool, so let's stop paying for it", it's not a gym membership.

I specifically wanted an indoor pool, it's the main reason I moved. SO and I used it all the time, and yeah, about 3 or 4 others do as well. We frequently say a thank you to all of our hundreds of neighbours for pitching in for us to have a giant pool that we can use in the winter.

London Terrace?

“We all boast about the half-Olympic-sized indoor heated pool that I call the ‘crown jewel’ of the building.”
A resident told me, “I’m often the only person swimming in the pool. I do swan dives and languorous laps and feel like a glamorous 1930s movie star.”

https://www.amny.com/news/london-terrac ... that-pool/

[Mr.BB]

Be aware the mortgage interest rate might be higher on a condo/townhouse.

I would be a little hesitant to buy a condo/townhouse that was built/first sold right before/during the Housing Bubble popped in your area (2000-ish thru 2009-ish). It was a little "wild west" for awhile and some shoddily built properties got built. I've read how it was falling to the current condo/townhouse owners of the buildings to pay for the repairs or replace shoddy building materials (or take the builders to court).

I would NOT buy a one bedroom/1 bath condo (unless you were buying in a high rise building with a view/amenities in a happening hot spot city). I would go with a 2 bedroom/2 bath condo. Maybe I'd go 3 bedroom if the price was right and the 3rd bedroom wasn't basically a closet.

My nieces/nephews have rented condos and apartments and a split floor plan seems to be attractive - a bedroom and full bath with a "master bedroom and full bath" on opposite sides of the unit - good for having room mates or some privacy if you have kids.

I would also want a washer/dryer in the unit. Even better if the unit was originally designed to have a washer/dryer - not a "remodel" or "update" to the unit.

I would avoid buying a unit in a building that was originally built as apartments. Buildings/properties that were built for individual owners sometimes have better 'soundproofing' and layouts for privacy. Apartments are built to house people for a year or two at a time. People who rent apartments may tough out a year (until the lease ends) if there's a lot of noise from the other units. When you own and live there you don't have that luxury. FWIW: I'd ignore my advice if I was buying vintage (1950's and earlier) that meet my criteria/needs.. cause I really like vintage buildings and would be willing to put up with some inconveniences.

When looking at properties with pools and tennis courts or other community stuff - really think about how much you will use those amenities. You will be paying for them thru you HOA fees. Do you really want to pay for a pool you will never use? If knowing you COULD use it or being able to say you have a pool brings you joy then it's a non-issue and worth the cost.

I would avoid buying any home/ condo..etc that was built from 2003-2007. Tons of subpar buildings/homes built during that time.

[unclescrooge]

Hi all - I’ve been looking for a house but in the area I’d like to buy an old outdated home goes for $275-350k, which seems to be out of my price range even if I pay 20% down. This led me to think about buying a condo. I could get a decent condo for $150-200k, but HOA fees are $300/mo. Considering I pay $1,040 for rent currently what are your thoughts? I’m inclined to continue renting my small 1br apartment but find myself wanting a yard for a dog, garage, office, etc.

Financial data as follows:
Age: 28
Salary: $70k
Cash: $72k in various accounts
Investments: $69k
Debt: $0

Pay the extra $75k and get a house. At 2.75%, an extra $75k increases your mortgage by $306 a month

[finite_difference]

Hi all - I’ve been looking for a house but in the area I’d like to buy an old outdated home goes for $275-350k, which seems to be out of my price range even if I pay 20% down. This led me to think about buying a condo. I could get a decent condo for $150-200k, but HOA fees are $300/mo. Considering I pay $1,040 for rent currently what are your thoughts? I’m inclined to continue renting my small 1br apartment but find myself wanting a yard for a dog, garage, office, etc.

Financial data as follows:
Age: 28
Salary: $70k
Cash: $72k in various accounts
Investments: $69k
Debt: $0

Pay the extra $75k and get a house. At 2.75%, an extra $75k increases your mortgage by $306 a month

If you get a house for $275k, you could afford the down payment? However it would be a bit of a stretch, and would continue renting to see how the RE market goes. You might be able to find a great deal.

[Tamarack]

If you need more convincing that renting is not necessarily throwing money way, read this:
https://jlcollinsnh.com/2013/05/29/why- ... nvestment/

In full disclosure, I share this as a home owner. Right now, owning a home outright give me enormous peace of mind.

Others have well explained the potential pitfalls of condo ownership. To reiterate, while there can be many benefits, condo ownership is not necessarily an entry-level version home ownership, because you are essentially living with and having to negotiate with other people about communal decisions. Many condo owners do not understand this and it can lead to a great deal of strife.

Also, pay attention to the posts about depreciation. In my area, new condos seem (to me) outrageously priced compared to SFH. The more affordable condos tend to be older properties. Maybe retro is cool, but not necessarily when it comes to infrastructure.

Here’s a cautionary tale. My condo is ~45 years old. This means the garage heaters cannot be fixed when they break down, they have to be replaced at $35k each, because parts for repair are no longer made. We can’t not replace them because there is exposed plumbing which could freeze in winter and cause owners pipes to burst. The fire detection system is original (and way past it’s expected lifespan). Of course it no longer meets fire code, but as long as it is working, it’s grandfathered in. Replacement is ~$300k. Since units in this association are “affordably“ priced, many owners are quite resistant to increasing contributions to the reserve fund (increases have to be approved by a majority of the association members). It just boggles people’s minds at how expensive It is to maintain/repair commercial real estate and a significant portion of the association thinks the board is just not trying hard enough to find lower cost solutions, because people can’t believe things cost what they do. This means that instead of being proactive, my association tends to deal with needed maintenance and replacement on an emergency basis, which increases the cost and adds inconvenience. For example, if the fire detection system fails, everyone would have to vacate until it could be replaced which would likely take MONTHS. This is just the tip of the iceberg.

I share this to underscore previous advice for anyone considering buying a condo to review meeting minutes and the financial statements, but even then it can be hard to know what is really going on with an HOA. My state doesn’t entitle prospective buyers to review reserve fund studies. If I’d had access to that info, it would have signaled there were a lot of expenses coming down the line and the association wasn’t saving enough to its reserve fund.

[brajalle]

I share this to underscore previous advice for anyone considering buying a condo to review meeting minutes and the financial statements, but even then it can be hard to know what is really going on with an HOA. My state doesn’t entitle prospective buyers to review reserve fund studies. If I’d had access to that info, it would have signaled there were a lot of expenses coming down the line and the association wasn’t saving enough to its reserve fund.

As others have indicated, it can be difficult to properly evaluate the finances, reserves, and maintenance situation with Condos. The above recommendation is pretty much the bare minimum, but don't be surprised - especially with smaller associations - if they just don't have a clue about prospective future needs or just how poorly capitalized their deferred maintenance & future capital expenses may be. Most condo associations in our state would look at you in confusion if you asked for a reserve fund study for example.

[dwc13]

I apologize in advance if I repeat things others have already noted in this thread. At this late an hour, I was much too tired to read all of the previous comments.

When you buy a condo, you're basically buying airspace in a building and a right to use common areas. It could be the best place you've ever lived, but there could also be some potential headaches. Unless your condo is in a smaller building (say, 12 or so units), you probably won't have much control over what happens outside the walls of your own place. During these challenging times w/r/t the global pandemic, you'll have to use your own criteria to evaluate the pros and cons of living in close proximity to others.

Part of the appeal of condo living is many owners prefer to let others take care of things (e.g., landscaping, snow removal, maintenance, common area cleaning). Nothing wrong with that -- that's something the monthly assessments can be used to pay. Unless you have a really great group that works well together, don't expect too many owners to consistently help out with replacing the occasional burnt out lightbulb in a hallway or emptying the waste basket by the mailboxes that is overflowing with discarded junk mail.

A prospective buyer should read the condo documents (by-laws & declaration as amended, other applicable documents such as meeting minutes) very carefully preferably before signing a contract to purchase. Don't rely upon the attorney review provision in the sales contract for an out. Many condos have provisions restricting or outright banning home businesses, renting a unit, operating a B&B, car maintenance in common areas, the number of people who can reside in a unit (there is often a city ordinance, too). There are also provisions concerning "quiet hours", pets, # of units an individual can own, what you can have on a outside deck, etc. In large buildings condo documents can dictate day/time when move-ins & outs can take place. Make sure you understand the relationship between percentage ownership interest and voting rights. It's not always 1:1. What percentage of votes is required for key things such as increasing condo monthly assessments, levying as special assessment, paying condo board officers, etc. Be especially careful if you buy into a 3 unit condo building. If 2 of the units are owned or effectively controlled by 1 person, you there could be a lot of 2-1 votes and 1 unhappy owner.

Make note of how often the condo association has successfully appealed property taxes. In most jurisdictions, the entire building is assessed and then property taxes allocated to individual units by percentage of ownership. As a result, it can be very difficult to find a good comp for a single unit condo. Typically the condo association will have to file the property tax appeal for the building.

Speaking of condo associations, take a very, very careful look at the financials. For a large building, are the financials audited by a reputable & qualified firm/individual? Are condo board members/officers paid (typically larger building)? In particular, pay attention to the reserves and the annual revenues/expenses. Are all owners current and fully paid up with their condo monthly assessments? Do the condo annual assessments sufficiently cover the annual operating expenses? If a management company is involved, what are its fees and responsibilities/deliverables? Building insurance (including general liability plus D&O coverage for condo board officers) is typically the condo association's biggest single cost item. BTW, many insurance companies will not insure a condo building that has insufficient reserves. Don't buy a unit if the condo association has insufficient reserves.

Special assessments -- are any anticipated within the next year or two? When was the roof/boiler/HVAC/other major expenditure items last replaced? If the roof was new 30 years ago but no work has been done on it since that time, you might want to make sure you home inspector carefully checks it. How many special assessments there been, what amount & payment terms, and what were the amounts assessed & collected used for? Part of the excess amounts from condo monthly assessments should specifically be allocated to special reserves each year, rather than needlessly spent. Depending upon the condition of the building and ongoing maintenance, big ticket items (i.e., roof, HVAC/boiler, tuckpointing, sewer connection) are going to happen sooner or later.

How many units are owner-occupied? How many are occupied by renters? Recall in the condo documents there is often a maximum percentage/number of units that can be rented. The percentage of owner-occupied units can impact mortgage terms and availability. It is also a factor when listing a unit for sale.

FWIW, I was the initial treasurer of the condo association of a 13 unit gut rehabbed building. That's why I have mentioned several items about condo association finances. We were very fortunate in having several really helpful owners at the beginning who volunteered their time helping out. As a result, we were able to keep operating expenses low (no management company) for several years. That allowed the condo association to build reserves more quickly and definitely helped when owners refinanced their loans.

Okay, that's it for now.

[retired early&luv it]

I bought my condo in early 90s. I can't imagine ever wanting to do lawn mowing or snow shoveling again. That said, my condo assoc does not shovel inside our private patios, so I do that when I feel like it.

I did not read the other posts, perhaps this was mentioned. There are lots of different types of condos. Mine is a two story plus basement, where you have the top to bottom. But you share one or two walls with a neighboring unit(s). I also have a private outdoor patio (fenced in) and private one car garage where I can store things without worrying about theft.

If you consider a particular condo, get a copy of the declaration and look at the definition of a unit. You own a unit, the association owns and maintains common property, you would pay a percentage of common property costs. In my case, my association does the re-roofing, etc. But my sister has a condo, the roof is her responsibility.

Look at the association budget, if they pay for something, you won't have to. Possible exception, if they pay for water, that might only be the water for the clubhouse. My assoc pays all of the water bill, there are no meters on each unit.

Show the unit definition to an insurance agent, ask them what your need to insure. In my case, my insurance is very similar to a renters policy.

You mentioned dog. Ask to see the assoc rules, some have restrictions on pets.

Things can get weird for shared costs, I had a girlfriend that had a unit where four units shared one furnace, so they split the costs four ways. I have my own furnace and AC unit and pay those costs myself.

[Sandtrap]

Condo vs Home is like comparing golf balls and rabbits.

Condo: OPR other people’s rules, neighbors, HOA, parking stalls, relative size, freedom to lock and leave and travel, etc.

None HOA home with land: Your rules relatively, garage, perimeter fence and room for a dog to be a dog, maintenance, etc.

Get what fits “you”. Don’t settle. Life’s too short.

Rent until you can afford a home, then get a dog.
j

[stoptothink]

I bought my condo in early 90s. I can't imagine ever wanting to do lawn mowing or snow shoveling again.

We bought our townhome in 2016. My parents were constantly telling us we'd regret not having a yard for our kids to play in (our neighborhood has a pool, community center, and 4 parks for our kids to play). Of course they say this as my wife and I spend every other Saturday doing their yard work.

I'd stay here forever, but the wife wants her SFH. But, we both agree that we have zero interest in a yard.

[Jsdi7873hd]

If I were you, I’d continue renting until I could afford a single family home. I was in your shoes and bought a condo in a small 7 unit building and vow to never do it again. There might be a difference if it was a 7 unit townhome but I was in a 7 unit building that was converted apartments. Like everyone else here says, do your due diligence and read the CCR, look for a reserve study, and just because the HOA “owns it”, doesn’t mean its carefree for you. At the end of the day, SOMEONE has to do the work of the HOA and for small unit buildings, it usually means 1 pour soul who has to learn how to run a building.

In my time as the pour soul HOA of this 7 unit building, we had to replace the roof, water heater, foundation, gas lines, termites, and random water leaks. Nobody else cared about the building since they were all renters and the other owners also didn’t care since I was getting it done. Luckily, they were ok with special assessments, but over the course of 6 years we special assessed 100K. My word of warning is: If you buy in a small building, be prepared to BE the HOA, not just JOIN the HOA. That means being available when a contractor comes over to fix something with the building. You have this in addition to maintenance on your own unit. After all this, I am a firm believer in finding a place with a high HOA fee, because it means they have built in reserves and are usually on top of maintenance. Low HOA usually equals lots of deferred maintenance.

If it is a townhome style building, try to get a building where utility lines are NOT shared. Another friend who owns a townhome told him that the #1 problem in Condo HOAs are water leaks that are shared and leak between units. In that case, it becomes a large protracted pain to determine who is at fault, which strain neighbor issues.

Back to why I said you should rent. We moved out into a large complex with 200 units, professionally managed, in a townhome with separate utility lines. By far, quality of life is higher for material reasons. But I am not sure buying this place was correct as it’s in a different part of town. Instead I wish I just rented something where my old condo was and let someone else deal with the problems. I’m pretty sure I would’ve made more money also as I just refinanced my current place and the appraisal said I already lost 100K in 1 year.

[sergio]

I would go with a townhome if possible just to avoid having neighbors above and below, some modicum of privacy, and fewer shared things that the HOA needs to handles.

Condo HOA fees tend to be higher because of elevators, pools/gyms, hallway/common area HVAC and fire sprinklers, and a lot more.

[harrychan]

tl;dr

DW and I face the same dilemma in the late 2000's as the housing market was scorching hot. In the LA area, SFH were running $600k+ for 3 bedroom / 2 baths while condos were around $500-550k. At that time, we had one toddler and knew we wanted more. We already walked through the pros and cons of both and knew we wanted a SFH as we didn't want to deal with selling and moving again in 4-5 years. We rented several condos and experienced condo living and didn't like it due to shared walls. There was also the lack of transparency with HOA's and its dues. We ultimately decided to stretch ourselves and got a SFH. We felt we made the right decision as we've been here for 10 years and our home value went up $400k. The same condos we were looking at is hovering about the same value. There may be a possibility we may move into a condo in our later years but we're very happy now.

[malibuboats91]

Thank you for all the replies! I’m happy I posted this, now I’m sure that a condo won’t work for me.

In your opinions, what salary do I need to have to afford something around $300k? I always go off the 2.5-3x your income rule. I’m fine being more liberal, but also don’t want to be house poor. I work in public accounting so my salary trajectory is rather high too.

I have expensive hobbies but have been pretty good keeping those costs low now that I want to buy a house. Also a hardcore car guy, have that paid off and won’t be buying another car for probably 3-4 years.

[Nowizard]

Rejected the idea due to what we considered to be high HOA fees for what you receive.

Tim

[stan1]

If you are "that guy" who wants to have the freedom to park in a visitor space all the time because his garage is filled with junk, repairs a roof leak by putting a blue tarp over it for years, or wants to put up aluminum foil on your windows all summer please do everyone a favor and not move into a HOA community.

[malibuboats91]

If you are "that guy" who wants to have the freedom to park in a visitor space all the time because his garage is filled with junk, repairs a roof leak by putting a blue tarp over it for years, or wants to put up aluminum foil on your windows all summer please do everyone a favor and not move into a HOA community.

I’d be the guy complaining about that kind of thing.

[tibbitts]

A condo doesn't make any sense for you at this time under the circumstances you describe - just not a good fit.

[Kelrex]

I would go with a townhome if possible just to avoid having neighbors above and below, some modicum of privacy, and fewer shared things that the HOA needs to handles.

Condo HOA fees tend to be higher because of elevators, pools/gyms, hallway/common area HVAC and fire sprinklers, and a lot more.

I have way more privacy in my apartment than I ever did in my townhouse. There were neighbours bloody everywhere in my townhouse complex, and I couldn't even sit quietly on my balcony without them talking to me. In my apartment building, I rarely see anyone except very briefly in passing, it's great.

I also live in one of those old 70s buildings with thick concrete walls, so I have far better soundproofing than I did when I only shared two walls.

[Kelrex]

Thank you for all the replies! I’m happy I posted this, now I’m sure that a condo won’t work for me.

In your opinions, what salary do I need to have to afford something around $300k? I always go off the 2.5-3x your income rule. I’m fine being more liberal, but also don’t want to be house poor. I work in public accounting so my salary trajectory is rather high too.

I have expensive hobbies but have been pretty good keeping those costs low now that I want to buy a house. Also a hardcore car guy, have that paid off and won’t be buying another car for probably 3-4 years.

There are some "rules of thumb" but truthfully none of them are even remotely relevant, because it all comes down to what your financial goals are.

What do *you* feel you can afford while still meeting your lifestyle and savings targets?

Also, you mentioned that a lot of houses around you are older and dated. Is this not something that you could slowly update over time as you can afford it? Or are you set one something turnkey? If so, then I would rent and wait.

[Normchad]

It’s a personal choice. Remember though, a condo is a firm of ownership, not an architectural style. Most look like apartments, some look like townhomes, etc. there are pros and cons to everything. I have a good friend who bought a condo when he was 25 and has been there for the last 20 years. He’s happy.

I rented a high rise condo for six months once. Prior to that, I never would have considered one. But we absolutely loved it. It was only 800 square feet, but it was enough for us.

When I retire, I will be seeking out a high rise condo in an urban setting.

Different people want different things. Get what’s right for you. I do think single family homes are more desired by shoppers, so they seem to appreciate faster and sell faster where I live than condos do.