Sunday, November 14, 2010

Top 5 Things To Consider When Buying A Condo

Lots of Buyers in Denver are uncovering 'deals' that resulted from the housing down-turn. For many, they are considering new types of investment opportunities - particularly condos. If you find yourself considering a condo as an investment - read this first!


Condos can make a wonderful investment, but there is research that must be done to ensure that you avoid some common pit-falls. Every condo community has a unique story to tell, and each Homeowners Association (or HOA) should be thoroughly investigated. Take a look through our 'Top 5 Things to Research When Buying a Condo' list below.


1. Is The Complex FHA Approved?

Even if you are not an FHA buyer - this is something to consider. FHA loans allow a very small percentage down-payment, and for many lower price point buyers, FHA loans are their only option. If your complex is not FHA approved, you may limit the pool of Buyers who could consider your property when you go to sell it.

2. What Is The Ratio of Owner-Occupied Units vs. Rentals?

This statistic is something a simple phone call to the HOA office can reveal. Not only will it have an impact on the FHA approval of the complex, it will also give you an idea of how many rental units exist in the building. Banks consider non-owner occupied units to be 'higher risk'.

3. What Do The Financials of the HOA Look Like?

A homeowners association should have Financial Statements as well as 'Meeting Minutes' from recent HOA meetings available upon request. Take the time to review these in detail! The HOA should have a good amount of cash in their 'reserves' account, to manage any building wide maintenance issues or unexpected expenses that should arise in the future. A lack of 'reserves' may result in unexpected 'Special Assessments' that owners will end up having to pay (on TOP of any monthly or quarterly HOA fee). Make sure that the the reserves are in line with the size of the complex, and that the financial statements are readily available.

4. What Is The Delinquency Rate For The Complex?

The delinquency rate will tell you what percentage of units are behind in paying their HOA fees. This may give you insight into the financial health of the HOA and consequently, the financial health of the owners in the complex. Nothing is worse than having your property depreciate in value because of an overwhelming number of foreclosures or distressed properties in the complex!

5. Is There Any Pending Litigation Which Involves The Complex?


This is another question to ask your HOA contact. Lawsuits against the HOA or against the Builder of a complex can have a real impact on the ability to sell your property! In addition, you will want to be sure of any issues that exist in the complex which resulted in litigation to begin with...



Some other considerations...
Consider searching other sources for information about the condo complex you are investigating as well. Some of our ideas...

Google

Google is your friend. Google the name of the complex... you never know what you'll find!

Craigslist
Do a search for rentals in the complex to get an idea of what units are going for in the rental market

Search the Denver Bedbug Registry

As gross as this may sound, you'd be surprised to read some of the reviews of big condo buildings. Some property management companies are very responsive to this type of problem, and some do nothing... make sure there isn't a reported infestation in the building you are considering!

2 comments:

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