5 Things You Need to Know Before You Buy a Condo 

 January 9, 2020

By Scott Teesdale  

minutes read time

You know how they say that your home should be like a small part of your heaven for you? Achieving that requires plenty of effort, though. To make sure you can create a little piece of heaven, you have to ensure that you get yourself a condo that has space that you can work with. So the question of whether you should buy a condominium (condo) depends on a number of factors, some of them we outline for you below.

Making condo your right choice!

When that is in question, it becomes clear that a condo is your best bet. But with great power comes great responsibility. So, when you sift through condos for sale, you should choose responsibly and wisely. To help you do that, we bring you this guide.

Why you need a guide?

But most prospective buyers tend to question why they even need a guide. Well, of the many reasons, most people that buy a condo are first-timers. About 50% of people that are buying condos are first time buyers.

Your guide to condo hunting

Now that it has been established that you need a guide, here is what you should know before you invest in a condo.

Condos are not apartments

One of the things to understand for first-time buyers is that condos are not apartments. Although there is some overlap when searching for an apartment as there is when searching for a condo, these are two fundamentally different real estate options.

A condo is a building that is privately owned and the owner can decide whether they sell it or rent it in the future. Apartments, on the other hand, are a part of a building that is often managed by a professional company and not a single owner. 

Condos, unlike apartments, are not designed uniformly across the entire building and allow space for creativity. So awaken your creative soul and get going. Happy designing!  

When it comes to an understanding of why someone wants to buy a condominium, the top reasons revealed are:

People find it:

  • cost-effective (Largely because the payment is a flat fee every month that includes the charge for all utilities and amenities).
  • low maintenance
  • designing with a personal touch and feel

Condos are NOT Townhomes

Sometimes easily confused, condos and townhomes are very different. A townhome (townhouse) is right for a larger family that may want more space and a larger community. Condos are better suited for singles or couples, or smaller families that don’t need a backyard or a shared community space.

Condos are real estate

Statistics by Seeking Alpha have shown that the prices for real estate, although fluctuating, have constantly shown a positive trend. This makes real estate one of the best investments that you can find

Having said that, it is important to understand that condos are considered to be real estate. Since the classification is rather difficult to digest for many, it is important to understand the reason behind this. It is because they are independently sellable, and apartments are not. 

Therefore, if you are looking to purchase a condo for investment, then you are on the right track. It is a wise decision that you should opt for. 

Warning: Do not be fooled by the misconception that condos are not real estate.

Condos a wise investment?

Image by Free-Photos from Pixabay

Moreover, many people tend to believe that condos are not a great investment because they are one of the slower running products on the real estate market.  Statistics clearly show that condo sales have not only been continually rising, but the rate of their growth has also been improving year by year.

The monthly association fee and repair fund

Every condo has a monthly Homeowners’ Association. The purpose of the Homeowner Association (HOA) is to keep the community clean and up to date. Specifically, the funds are usually used for at least the following:

  • litigations
  • repairs
  • maintenance

These are often calculated based upon the number of units in the scheme and the amount required for each unit maintenance. 

The repair funds

Condo Repairs
Image by Francisco Leão from Pixabay

These are not a one-time payment and have to be paid periodically (usually every month) throughout your residence. Another very important factor to be considered is the repair fund.

From the dues collected every month, every condo association is to put aside a sum for major repairs. The general rule of thumb for this fund is, a complex less than ten years old requires a repair fund of 10% of the cost of major item repairs.  For a complex older than 20 years, though, the fund percentage rises to about 50%.

The types of financing available

There are many types of home loans for purchasing a condo, many of which are great for first-time homebuyers! (We wrote a guide on mortgages for first time buyers). Knowing all your options is a great way to ensure you receive the best rate and loan possible for your situation. We listed below just a few of the options to finance your condo:

  • A Federal Housing Authority Loan.
  • A Veterans Administration Loan.
  • A U.S. Department of Agriculture Loan.
  • Conventional loan.

If you are not a veteran or belong to the agriculture sector, it is obvious that you would want to go for an FHA loan. In that case, it is essential that you understand the terms for an FHA loan. An FHA loan can offer you down payments of as low as 3.5%. However, the requirements could be rather strict. An FHA loan can only be achieved on an FHA approved condos list.

Moreover, it requires that the condo be your principal residence. Several other tiny details are worth going over before you avail that loan.

Amenities are not your responsibility, but appreciation is slower

Condo Tennis Courts
Image by HeungSoon from Pixabay

Most people tend to put off their buying decisions for condos because they are too scared to think about the upkeep of the condo amenities. However, the amenities with a condo that includes swimming pools and tennis courts are not your responsibility.

While this is great to know, but what you should also know is that they come at a cost. The rate of appreciation of your condos depends on how you use the condo and these amenities.  Furthermore, for this very reason, the prices of condos tend to appreciate slower than most other real estate. 

Final word

While creating a piece of your heaven here on earth sounds like a very mythical notion, we guarantee you that a condo bought wisely will do it for you. 

The best way to make sure that you do get what you want, you should hire a real estate agent that usually deals in condos to secure the dream home!

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I use data and technology to help Millennials navigate the ins-and-outs of buying or selling a home in today's market. From appraisals to mortgages to zoning, I cover it all with the goal to teach others. Connect with me on social via the icons above.