Buying a condo advice

My wife and I are thinking about buying a condo in DC. Our idea is that we could buy something now that we would rent out for the next decade or so, and we would move in to the condo when we got tired of keeping up our rowhouse (also in DC). At that point we’d sell the rowhouse.

Is that a solid plan? I’ve heard that there are a lot of hidden fees with condos that we’d need to plan for. Any and all advice welcome.

What is your income?

Assuming that you can afford 2 residences, one of which you are paying rent, the other you are paying a mortgage, it is good because you are building up equity instead of throwing money away on rent.

On the other hand: is it cost effective? Depending on how you divide costs between your wife and yourself, this could be an income trap. Every dollar you spend on rent is essentially throwing money away.

Don’t underestimate how much of a nuisance it can be to deal with the other members of the condo association. Every association has its malcontents and misfits, it seems.

Also, make sure the condo docs allow renting. Some don’t. Be aware it can be tough to get a mortgage in a condo building that’s less than half owner-occupied – so other owners have a vested interest in keeping absentee owners out of the picture.

If you’re planning to get a mortgage yourself to buy the place, you’ll probably have to put at least 25 percent down. And be prepared for a months-long paper chase.

This is what I came in to mention - FHA approval requires that a building be 50% or more owner occupied, which is why this is important. Also rental condo buildings are perceived as being less desirable.

My husband and I bought a condo in 2003, and we still live in it. I know this isn’t universal, but we would have been much better off financially if we hadn’t bought it. This is not to say that YOU shouldn’t buy one, but you should take a very, very close look at the building’s finances and maintenance history. I would find someone - an attorney or someone like that - a neutral 3rd party, who is familiar with condos in your area - to help you.

Specifically, you should look at what maintenance has been done on the building, and when, and what is likely to need to be done in the future. How old is the roof? How old is the siding? Windows? Are there going to be any big projects necessary in the time that you anticipate owning? How much are these projects going to cost? Once you know that, you can look at the building’s finances, and see if they have enough saved to cover those projects (or if the dues bring in enough over the annual operating cost that they’re currently saving up to be able to cover the costs). If not, RUN AWAY.

It’s also useful to look at the percentage of units that are owner-occupied vs. renter-occupied, because generally owners will care more about the building, their neighbors, etc. Also, there may be a cap on the number of units that can be rented out at one time - if you’re thinking about renting yours out, you’ll need to know that. There may also be a requirement that renters must lease for at least 6 months or 12 months.

You should also look into other things that may be required of owners: do you have to serve on the board every x years? Do you have to put in so many hours of work around the building every year? What’s the process if you have a loud/obnoxious/whatever neighbor? Are you allowed to put up a satellite dish? Can you pull up the carpet and put down hardwood? Read the CC&Rs (covenants, codes, & restrictions) VERY CAREFULLY. Talk to your potential neighbors, if you can.

Generally, owning a condo gets you most of the hassles of home ownership (appliance breaks? no landlord to call!) and most of the hassles of apartment living (neighbor throws parties till the wee hours!), without the benefits of either (i.e., you can’t add onto your condo like you could a house; you probably won’t have much of a yard; you can’t just call the landlord to deal with whatever problems come up; etc.) In some buildings, the “apartment living” part is minimized - maybe you’ll have great neighbors, or it’s such a well-built building that you don’t hear them at all, and you all become great friends.

We have had some fantastic neighbors, who will be lifelong friends, and some not-so-great neighbors. As I said, we would have been better off financially if we hadn’t bought this place, but our lives would have been so dramatically different (we wouldn’t have gotten our cats, and who knows if/when we’d have had our son? And we would never have met our neighbors, let alone become such good friends with them.) that I can’t honestly decide if I wish we hadn’t bought it. You might find a great building that you LOVE, and that is well-managed. But you should do A LOT of homework beforehand, so that you go into it with your eyes open - I wish we had.

Our story is that we bought in a small, 8-unit building in 2003, and in 2004 the HOA had a reserve study done. The study found that the building was going to need significant work (new roof, new decks, new windows, new siding, etc.) within 10 years, and that the current dues weren’t going to come close to covering it (thank you, original owners who didn’t care to start saving way back when!). The HOA could either A) raise dues DRAMATICALLY to save for the needed work, or B) require a special assessment, where each unit would pay their percentage of the construction costs, and do the work right then, so that the people who were paying could actually enjoy the nice new stuff on the building. We all decided on option B. That meant that my husband and I had to get a home equity loan for $30,000 the year after we bought. That wouldn’t be possible today, obviously, with the way the housing market is, but it was then - so we did it. Of course there were construction issues, and one neighbor sued the HOA, and there was all sorts of drama. It was messy and expensive, and now we’re stuck here until the market improves enough that we can break even when we sell. This sort of horror story is… not uncommon with condos, but it isn’t universal, either. If you do your homework beforehand, you should be all right.

Good luck!

Thanks, financially this is doable, but will require a loan. We could come up with a substantial downpayment. We are currently in the day dreaming stage and are toying with buying a condo in a building that has just started construction, so it’s not like I need the answer today.

I’ve never in my life heard of someone buying a condo and being happy with the end result several years down the road.

But good luck.

We have had our present condo nine years now and are perfectly happy with it.

Before buying it, we’d looked at new ones and used ones and finally decided new is the way to go. That’s what I would recommend, although the situation between there and here is probably completely different.

We’ve had condos before and always bought new. The last one we had for seven years, and wanting to be back inside the city proper was the main impetus for moving. The condo itself was still good, but the company running the place was not very good, and the neighborhood was deteriorating slightly (although I hear it’s picked back up since).

Huh? I’ve been in mine 24 years. Many of my neighbors have been here 30 or more. I like the building so much that I traded up from a 1BR to a 2BR nine years ago.

I bought mine when the housing market dropped out in my area. So glad I did. Generally I hate condo life but I was lucky to find a very well built condo building. It was originally the Thermos brand factory in the 1800s since converted to condos (obviously). This means I have a very solid building with brick walls and industrial framing which makes it very quiet and safe. Repurposed industrial buildings are very popular right now and if you find one that’s well designed my advice is to check it out.
My 2 cents.

Well then, I stand corrected.

I know my mother bought a condo here in Dallas for $100K (new) they were all the rage. 20 years later the complex went to shit. The HOA fees were through the roof and by then most of the housing was being rented out to section 8. My Mom wound up selling hers for 20K. (Ouch)

I’ve heard other horror stories too. So maybe my take on this is a little jaded.

Thanks for the replies. Like I said, we’re still in the day dreaming stage. There are lots of new condos going up in DC and my preference would be for a new one, or one recently built.

There’s always one thing that keeps me away from condos: Condo fees. You have no control over them, and the fees typically never go down.

Or, conversely, that they’re enticingly low, and not adequate to fund needed repairs, which then require a special assessment and unanimity of the owners.

I am. So are many of my neighbors who have lived here for decades. Admittedly, I have a tiny bit of regret that I bought near the height of the housing bubble, and I wish I’d bought either way earlier or way later, but I have no regrets about the condominium part of the decision, just the timing. I did buy in an established, well managed building with solid financials.

I have heard horror stories, especially with new construction and recent conversions. If there are problems with the construction, getting those sorted out can be a very expensive headache for the owners.

Neither do the costs of home maintenance and repairs. If you buy a house, ideally a homeowner should be putting away money for regular upkeep so that when the needs a new furnace or plumbing repairs or whatever, the money is just there. Condo fees force the owners to do put that money aside.

The fees in Thailand are pretty low compared with the US. But our complex of four 36-story buildings has just embarked upon a repainting. We live in the newest of the four buildings, and even though it’s less than 10 years old, it could use a new paint job thanks to the brutal tropical sun. Some residents did not want to shell out money for this, but over the past couple of years the building’s management somehow got everyone to agree. I believe the entire job is costing 3 million baht (US$100,000), and our share, based on our unit size, comes to about 16,000 baht ($534). We’ve already ponied up, but I’ll be surprised if everyone does without any fuss.

The difference is though. As a home owner you know what needs to be done, when it needs to be done. Your the one paying for the repairs, hiring contractors. Where as with a condo you have to go with the committees word on it.

My mother owns a condo, they wen’t through a nightmare where the committee made of up of fellow condo owners. Continually raised fees. It turned out they were giving out contracts to friends and family giving them work. And the reasons we’re dubious at best. I saw heavy machinery coming into my mother’s place to remove a feathering snowfall. They eventually got a lawyer and removed the whole committee and started over.

Not necessarily. People understandably want their condo fees to be low, and that can result in the board not putting aside enough money for big repairs down the road in order to keep the residents happier in the short-term. My parents (who live in a townhome) have been hit with several big “special assessments” over the past several years because of bad planning by their townhouse association board many years ago.

When you’re a homeowner, your neighbors’ financial imprudence doesn’t have such a direct impact on you. If their roof leaks because they failed to set aside enough money for repairs and can’t afford to fix it, it’s not your problem.

Yep - this is quite common among new construction.

To get a feel for what they might be down the line, look at similar places for sale now, that have been around for a few years. It may or may not be possible to find the historical fee rates for those places.

Do look into threads where people post about the hassles (and rewards?) of being landlords. Also, the tenant-rights rules in DC. And could you afford to pay the loan on the place for more than a few months if it’s unoccupied?

Which is what happened with our building painting. And we also had to pay extra for some elevator repairs last year even though we personally usually just take the stairs. (It’s a 36-floor building, but we’re only on the sixth. It’s about the only exercise I get.)

But fortunately for us, due to the size of the compound our share is never oppresive. I’d actually like to see our condo fees go up. It was pointed out at one annual meeting that our condo complex has the lowest fees of any in this area. But most of the owners always vote against raising the fees.

But I still prefer condo living to a house. It sucks not being able to keep a dog, but not dealing with yardwork is heaven.