Well, let’s start of by defining what a condominium is. According to Investopedia, a condominium is unique in that some parts you can own directly whereas some parts is shared and considered “common property”. What are the pros and cons of condominiums? Well obvious benefits of condo-living include increases security (if you are in a higher floor, you won’t have to worry as much about a burglar coming through into your living room or worry about someone breaking in while you are on vacation), there are less outdoor chores associated with a house (such as cleaning, raking leaves, shoveling snow), the space is (usually) smaller so there’s less to clean, and probably most of all, many condos have great views. Some of the downsides to condominium living is less privacy (staring at someone else’s 11th floor gives you less privacy), more sound (especially in wood-frame condominiums), and having to abide by the strata rules.
Here are 5 Things to think about before you commit to buying your first condo.
The Hot Real Estate Market Isn’t That Hot When It Comes to Condos
It is well known that condos appreciate at a much lower rate than houses. This Yahoo Canada article explains at length the difference between buying a house and condo and why buying the cheapest property isn’t always be the best option. Therefore, if you are looking to buying a place because you want to “get into the market”, think again, you might be better off investing that money into the stock market instead.
Add Up the True Cost
Maintenance fees, property taxes, and home insurance are just a few of the things that contribute to the final monthly cost of the condo. When you add up the true cost of the monthly cost, it will likely be more expensive than renting your home. Don’t forget to add up the cost of mortgage interest
Related: How Much Home Can I Afford
Think Five Years Down the Line
Think about if you will still have this condo five years down the line. Will it still work for you? Would you want a pet (make sure your place allow pets if you’re even remotely thinking that you want a furry companion) or would you want to rent it out (make sure there are no rental restrictions otherwise it will be difficult to go on the wait list to rent your place out). Most importantly, although it is difficult to predict, if you need to sell it, would you sell it for a loss? Don’t forget to factor in real estate fees and closing costs.
Will the view that you have now be affected in the future? In the land of over-development Vancouver, towers are going up everywhere and blocking what used to be beautiful views!
Is it Affordable?
Probably most importantly, is it affordable? I have a friend wanting to buy a two bedroom condo but can’t afford 20% down. If you are going to have to be house poor to be able to have shelter over your head it’s not worth it. Although places recommend less than 32% of your gross salary on shelter costs, a nice (my opinion) is less than 20% if you can swing it. This gives you flexibility to travel if you need to, save money into your retirement and investment fund, and frankly, enjoy your life a bit.
Is There Storage? Enough Contingency? Flexibility?
Is there enough storage for you? Does it have a storage locker? Bike storage? Is there a healthy contingency fund? (A contingency fund is like a “raining day savings” for all the condominium owners). Is there flexibility? (How is the strata? How is the property management company?)
Hopefully these questions will help you think about your potential new home (or new rental property) and whether it is a good fit for you.
Readers, do you have any other tips to share with readers about things to review before buying your first condo?