A condo which is the short form of the condominium is not as the same as buying a single-family home.
One must consider a lot of factors before purchasing the condo.
At times, the purchase of a condo in real estate market comes at a lower price than in the purchase of a single-family residence.
Typically, a condo is a shared piece of property where there exist individual owners of each condo or unit.
Quite often, condos offer many services that are not limited to pools, tennis courts and fitness centers among others.
Condos are known for their lifestyle of living as well as the less maintenance which makes many people buy them.
One must be aware of the fact that each condominium community is different from the others when buying a condo.
You should know that each community has its amenities, Management Company, association fees, and its own community rules.
The number of condo communities in a certain area depends on the community.
There may be hundreds of condos or even just a handful of them in a certain area.
Therefore, there exist many tips that you should be aware of before buying a condo investment property.
Check with an Experienced Realtor
Since the sale of condos is different from the sale of vacant lands, multi-family or single family, it is very essential to hire a real estate agent experienced in the sale of condos.
This is because the purchase contract for a condo is different from that of the other residences.
One difference that exists in the sale of condos is that most communities require a deal to be signed before closure of the sale contract.
The agreement that you sign states that you clearly understand and agree to the rules and regulations stipulated by the association.
With the existence of such differences, working with an experienced condo selling agent is very relevant since the agent will easily guide you through the whole process and ensure that the most critical details are not overlooked.
Check the Comps (Both Sale & Rental) & Calculate the Cap Rate
Any Realtor with sense is bound to show you the comps of the property you are considering to buy if they do not have access to a new Realtor.
However, most of the Realtors do not possess enough know-how in analyzing the rental comps.
However, it is not a very sophisticated process.
Just review the condo docs very carefully.
Ask for the closed, pending and current rentals for the past six months if the agent you are dealing with is not specialized in the analysis.
This gives you a rough idea of what you expect in the rent for your property. Through this, you can come up with an idea of what to offer for the purchase price.
You need to be as close as possible to the 10% Cap Rate. It is okay if it surpasses this Cap Rate but anything above 5% is okay in areas with the high market such as Florida.
The Cap Rate is calculated by taking the monthly net income, multiplying it by 12 and then dividing it by the purchase price.
Know What the Condominium Includes
The idea of knowing what is included in the condo sounds silly, but it is very relevant.
When you are purchasing a condo, it is relevant to know whether the condo has any additional storage or includes reserved parking.
Does the condo community offer any parking for your visitors? Is the spot reserved for parking in the covered garage?
An example of this is the recent condo sales in Rochester, NY where the seller had rented the parking spot to one of the members of the community.
Fortunately, the agreement between the two was not a long-term.
Thus, it could not have inconvenienced the buyer as such.
Therefore, it is relevant to make sure that the parking space, as well as the additional storage space, are available before purchasing the condo.
Also, make sure that the property has or allows a washer and dryer.
This is an essential part of every home since you can always charge a monthly rent of $200 to $500 more if the condo has the washer and dryer in it.
People always pay premiums for such facilities but do not be discouraged if the washer and dryer are not in the condo you are interested in.
If it does not exist, you can always put it up to increase the bottom line.
Talk to the Home Owners Association
Having an in-depth talk with the association is one of the most critical things that one should consider when purchasing a condo.
This helps you to know the number of association fees that you are supposed to pay.
Condo communities have annual, bi-annual, quarterly and monthly fees charged per residence.
Such association charges are used to cover for maintenance, insurance, and other common expenses. Therefore, being aware of these charges is essential.
Also, it helps one to be acquainted with the association rules.
Since every community has rules and regulations that govern it, the condo community rules and regulations are drafted and exercised by the condo association.
To ensure that you do not break these essential rules speaking to the association and reviewing their rules and regulations is very necessary.
For example, many condo communities do not allow pets.
The last thing that you would hate about the place is learning that the association does not allow pets in the community if you love having them around.
Another example is being aware of the short-term rental restrictions and if there are quiet hours.
This is essential especially to persons who had to put up with bad neighbors in their past residences and also for those who like the idea of renting their places of residence on a short-term basis.
Therefore, you should understand that the existence of the association rules is essential and that they are part of the condo community.
To make sure that this works out for you, make sure that you talk to the association and review their rules and regulations.