6 Factors in Buying a Condo

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In certain areas, condominiums are the predominant type of housing. This is true in vacation areas like Daytona Beach. If you’re looking for a home in Daytona Beach, you’ll find that most of your options are condos, especially the closer you get to the water. 

Of course, resort communities aren’t the only places with condos—they’re in urban and suburban areas too. 

A condo is a privately owned individual unit. Even though it’s privately owned, it’s within a community of other units. The typical way it works is that you own the interior of your condo, and the components make up the exterior walls. Then, the owners in the complex jointly own their shared common areas. 

A homeowner’s association will usually manage common areas and oversee restrictions, conditions, and covenants. 

Buyers may opt for condos for different reasons. If you’re buying a second home or vacation rental, they make a great choice because a professional management company takes care of everything except your actual interior. 

Condos tend to be more affordable than single-family homes as well. If you’re looking for a more affordable option than a single-family home, then Centricity Condos on 241 Church Street could be a great place to start.

A condo can be a good investment, whether you want to rent it short-term to vacationers or to long-term renters. 

With all of these in mind, the following are some of the important things to know about buying a condo

Beautiful view from a modern high rise in Mexico.

1. Is It Right for You?

Make sure that you actually are cut out for condo living before you go any further in the process. You’ll have to deal with a homeowner’s association, and this is going to include covenants, restrictions, and conditions. You have to comply with these things to live there, and if you don’t want to follow restrictions, a condo might not be right for you. 

If you don’t comply with the rules of the complex, you could be fined or sued. 

You also have to make sure that you’ll be okay with communal living. You’re going to be sharing walls and common areas. You may have to talk to your neighbors a fair amount if you feel obligated to. 

Some people look at this as an upside of condo living, and others see it as a potential downside. 

You might be looking for a condo because you want something low-maintenance or because it’s within your budget, whereas a single-family home isn’t. 

2. Financing

Financing a condo can be different than getting a mortgage on a house. 

Lenders look at factors beyond your financial stability and situation. A lender will look at the occupancy of the building and its financial health as well. The lender might consider the age of the property, amenities, grounds, structural integrity, and the current finances of the building. 

Homeowners’ associations have to maintain reserves and annual budgets. The reserves are put aside to pay for ongoing maintenance, recurring expenses, and one-time expenses. 

If a bank is trying to decide whether they’re going to extend the financing for a condo, they might want to see HOA meeting notes, proof of insurance for the building, budgets, and information about any current or proposed future assessments. 

While the lender may look at different things, you can still apply for a condo loan through the same financing programs as you would a single-family home. 

Another topic to discuss with lending on a condo is warrantable vs. non-warrantable. A warrantable condo is one that a buyer can finance and underwrite with a conventional mortgage. This means the condo has to meet the minimum guidelines that traditional mortgage companies set. 

A non-warrantable condo is riskier and is going to be tougher to sell. They’re not easy to get financing for. 

Even after you make an offer on a unit and it’s accepted, you’re going to have to do more due diligence. You usually can’t get the full documentation for a condo complex until you’ve had your offer accepted. You may not be able to see things like the covenants until your offer is accepted, so it can be time-consuming because then your lender has to see it. 

The recommendation is often to ask for at least six months of HOA minutes because this can give you an idea if there are any disputes or ongoing issues you should know about. 

Not all condos are going to work with FHA loans. 

3. Check for a Rental Cap

If you’re buying a condo, you might want it as an investment, but you need to make sure you’re clear on the complex rules for renting it out. Some complexes will say no rentals at all, and others will put a limit on how many units can be rented. 

If you’re not planning on using a condo as an investment, then this isn’t something you have to worry so much about, but it can still be worthwhile to find out, just in case. 

4. Take HOA Fees Into Consideration

As you’re thinking about your budget and calculating your monthly housing costs, make sure you’re factoring in HOA fees. It’s an added cost, but there are situations where it can actually save money, so crunch the numbers. 

For example, you might be discouraged by a big HOA fee, but if it includes things like trash pickup and utilities, then you can take these expenses out of your budget. 

5. Assess the Common Areas

You want to look at the condition of not only the individual condo you’re thinking about buying but also the common areas. If the common areas aren’t well-maintained and they’re in bad shape, it can signify a poorly run association. 

6. Talk to the Neighbors

Finally, when you’re considering buying a condo, you should also talk to the neighbors. Get a feel for their thoughts on the complex and community and what they like and maybe don’t like as much. You want to talk with people outside of the association, but of course, don’t put too much stock in something any one person says. 

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