Pros and Cons of Condo ownership


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Here is a presentation about the benefits and drawbacks to condominium ownership.

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Pros and Cons of Condo ownership

  1. 1. Pros and Cons of Condos By David Belman
  2. 2. Key Condominium Terms <ul><li>Association </li></ul><ul><li>The managing body of the Condominium, pays bills, enforces bylaws, hires contractors </li></ul><ul><li>Unit </li></ul><ul><ul><li>Your dwelling space. Inside wall to inside wall. Could have 1, 2, 4, or more per building </li></ul></ul><ul><li>Budget </li></ul><ul><li>Annual cost breakdown for the association includes: grass cutting, plowing, insurance, taxes on common elements, reserve fees, etc. Each condominium has a yearly budget, which is made public, and any changes to must be voted on. Each owner gets 1 vote. Any surpluses will go directly back and come off next year’s dues. </li></ul><ul><li>Common Elements </li></ul><ul><li>Items accessible by all: Grass, Driveway, Sidewalk </li></ul><ul><li>Limited Common Elements </li></ul><ul><ul><li>Part of the association but usable by the unit owner. Decks, hallways, etc. </li></ul></ul>
  3. 3. New Real Estate Law Regarding Condos <ul><li>Small Condominiums- Are now developments consisting of 12 or less units. (previously 4) Do not require full disclosure materials. </li></ul><ul><li>Rental Units- An owner is new required to provide tenants with copy of disclosure materials prior to tenant occupying the property as well as provide the association a copy of the lease. </li></ul><ul><li>Conversions- Multi family buildings can immediately convert to condominium. (Used to be 120 day moratorium) Tenants now have 120 days to purchase or move out. </li></ul>
  5. 5. Shared Amenities <ul><li>Condos offer expensive amenities that you may not be able to afford or have space for. </li></ul><ul><li>Pools, Tennis Courts, Trails, Work out Facilities, Large Gathering Rooms, Laundromats, Parks, Open Space, etc. </li></ul>
  6. 6. No Winter Maintenance <ul><li>No Snow Plowing </li></ul><ul><li>Shoveling </li></ul><ul><li>Salting </li></ul><ul><li>Ice Chipping </li></ul>
  7. 7. No Summer Maintenance <ul><li>No Grass Cutting </li></ul><ul><li>Weeding </li></ul><ul><li>Fertilizing </li></ul><ul><li>Edging </li></ul><ul><li>Pruning </li></ul><ul><li>Leaf raking. </li></ul>
  8. 8. No Exterior Maintenance <ul><li>No Exterior Building Work and typical Homeowner Maintenance items. </li></ul><ul><li>•Painting </li></ul><ul><li>•Caulking </li></ul><ul><li>•Cleaning Gutters </li></ul><ul><li>•Routine Repairs </li></ul>
  9. 9. Other Pros of Condos
  10. 10. Less Stuff <ul><li>Another small benefit of condos is that you no longer need the snow-blower, lawnmower, and other cumbersome tools which frees up space in your garage and home. </li></ul><ul><li>Even though you might be downsizing, you can pick up additional space getting rid of things you do not need anymore. </li></ul>
  11. 11. Economies of Scale <ul><li>Economies of Scale 1 building is 2, 4, 6 or more jobs for a contractor. They have less travel time between job sites. </li></ul><ul><li>More density = more units for developer = lower cost per unit for customer. </li></ul><ul><li>More units also = lower cost per unit for amenities and maintenance agreements </li></ul>
  12. 12. Benefits of Ownership Vs. Renting <ul><li>Tax deduction for interest payments. </li></ul><ul><li>A portion of your payment is applied to the principal to build equity. </li></ul><ul><li>You have the ability to change & alter the inside because you own it unlike an apartment. </li></ul><ul><li>Quieter: Most condos are designed with two walls & air space between units. </li></ul>
  13. 13. Own a Bit of Everything (sort of) <ul><li>Condominium Owners own an Equal and Undivided interest in all common elements. </li></ul><ul><li>Example: 20 units in condo and it comes with a tennis court. You would then own 1/20th of the court but would have full access to it. </li></ul>
  14. 14. Leave… And Don’t Worry <ul><li>You can leave for long periods of time and not worry about maintaining and upkeep of your building. Condos are perfect for snow birds and people whom travel a lot. </li></ul><ul><li>Associations typically keep their eye on the project with periodic site inspections. </li></ul><ul><li>Neighboring units owners can easily stop by periodically and check the unit. </li></ul>
  15. 15. More Time <ul><li>Condo living allows more time for fun things in life. </li></ul><ul><li>Family </li></ul><ul><li>Hobbies </li></ul><ul><li>Travel </li></ul><ul><li>Sports </li></ul>
  16. 16. <ul><li>Think of how much time you spend per year doing exterior maintenance and chores? </li></ul>
  17. 17. <ul><li>What could you be doing instead? </li></ul>
  18. 18. Sense of Community <ul><li>Condos typically have a great sense of community. All the common areas create great opportunities to meet neighbors and gather. Also many condominiums have social groups that arrange poker games, Holliday events, and gatherings for the big game. </li></ul>
  19. 19. Consistent Feel <ul><li>Condominiums typically have a uniform feel and design. </li></ul><ul><li>Pre-planned architectural designs from the start. </li></ul><ul><li>Layouts of the site are consistent. </li></ul><ul><li>Matching mail boxes & lamp posts. </li></ul><ul><li>One builder instead of multiple builders who do things differently. </li></ul>Bottom Line: You will have a better feel for what you are going to be living next to.
  20. 20. Resale/Marketing <ul><li>The largest portion of the population is baby boomers, which is generally the target market for condos. Therefore a large portion of buyers are coming into that market, which is good for resale and fluidity in the market. </li></ul>The &quot;baby boom&quot; propelled the largest percentage increases of any age group in the 1990-2000 decade, an analysis of Census 2000 data by the Commerce Department's Census Bureau showed today. (The baby boom refers to people born in the post-World War II period from 1946 through 1964.) People born during the early years of the baby boom (1946 through 1950) fueled the 55-percent increase of the 50- to 54-year-olds, the largest percentage growth between 1990 and 2000 of any five-year age group, the Census Bureau said. The second fastest-growing group was 45- to 49-year-olds, which registered a 45-percent increase. Source: U.S. Census Buearu
  21. 21. Development Condos developments cost more than single family because they have more common area. True or False
  22. 22. <ul><li>False </li></ul><ul><li>Most newer single family developments have common areas, ponds, and association dues just like condos. </li></ul><ul><li>The costs for these common areas is typically minimal because they can be divided over a large number of units and those open spaces add long term value to the home & project. </li></ul>
  23. 23. Right of Recession <ul><li>Unlike single family, condo buyers have a 5 day right of recession period after signing offers to purchase. </li></ul>
  24. 24. CONS of Condominiums
  25. 25. Additional Monthly Expenses <ul><li>Condo dues </li></ul><ul><li>Reserve/replacement fees/funding </li></ul><ul><li>Convenience costs money </li></ul><ul><li>May have to pay for higher levels of service than you desire </li></ul><ul><li>Common Area </li></ul><ul><ul><li>Maintenance </li></ul></ul><ul><ul><li>Insurance & Liability </li></ul></ul>
  26. 26. Additional Fees <ul><li>There are occasionally additional assessment fees to handle larger repair jobs. Your fees may also be paying for amenities, such as a swimming pool, that you may not use. </li></ul>
  27. 27. Politics <ul><li>Board meetings </li></ul><ul><li>Rules & Regulation Committees </li></ul><ul><li>Different opinions on how to regulate </li></ul><ul><li>Different opinions on how to spend budget </li></ul><ul><li>Hard to please everyone </li></ul><ul><li>Are you able to attend this meetings? </li></ul>
  28. 28. Less Privacy <ul><li>Back yard, how much will you have? </li></ul><ul><li>Some condos have higher density than single family homes. </li></ul><ul><li>Adjacent units. </li></ul><ul><li>Noise: How well are units insulated? </li></ul><ul><li>Side X Side vs.. 2 stories up and down. </li></ul><ul><li>No real lot boundaries. </li></ul>
  29. 29. Mortgages <ul><li>Usually more steps involved to finance a condo. Lenders check # units available, # sold, # under construction, etc. Example: Form #921 </li></ul><ul><li>Lenders are stricter on some newer condominium developments and may not offer some loan programs they would normally offer until project gets off the ground. </li></ul>
  30. 30. Insurance <ul><li>Must work with insurance agent to determine liability and specific protection needed. Most likely you will need 2 policies. One for the condominium/association and one that will function like an owners/renters policy. </li></ul><ul><li>Usually more time is required with your insurance agent to determine appropriate coverage to make your insurance overlap with the associations. </li></ul>
  31. 31. Little Say <ul><li>Limited ability to change exterior of the building. May not be able to at all or need association approval. </li></ul><ul><li>Political Signs Can you show your support? </li></ul><ul><li>Gardens Are they allowed, do you need permission? </li></ul><ul><li>Plants & Trees Can you add or modify your landscaping? </li></ul><ul><li>Flags, lawn decorations Can you put them on display? </li></ul>
  32. 32. Gray Areas <ul><li>The following may or may not be benefits of Condos. </li></ul>
  33. 33. <ul><li>Can you have them? </li></ul><ul><li>Are they restricted? - Typically by size, weight, quantity, or species. </li></ul>Pets
  34. 34. <ul><li>Where do your guests park? </li></ul><ul><li>Is there ample street parking or designated overflow lots? </li></ul><ul><li>Is overnight parking allowed on a driveway? </li></ul>Parking
  35. 35. <ul><li>Can be both an advantage and disadvantage in a condominium. Some condominiums allow units to be sublet to tenants others may not. </li></ul><ul><li>Too many rental units in a condominium can deter future buyers and hurt resale values. </li></ul><ul><li>Is the development becoming a glorified apartment? </li></ul>Rental/Subletting
  36. 36. Market Update <ul><li>Federal Tax Credit-Purchase by 4/30/09 Close by 6/30/09 </li></ul><ul><li>Inventory Levels </li></ul><ul><li>Seller Discounts </li></ul>
  37. 37. Question & Answer Session