Buying a condo is different than most other types of residential real estate because there are special conditions that go along with buying a condo. In most cases, you are buying one part of a whole building and there can be rules and regulations that go along with a purchase like that which can be difficult to understand. Before you start hunting for a condo, there are questions you should remember to ask that will help you to make the right decision.
What are the monthly dues?
Just about every condo has a homeowner’s association (HUA) that dictates almost every aspect of life in the condo. To keep the HUA going, there are monthly dues every condo owner must pay. You should ask how much the monthly dues are and what kinds of services you get with those dues. Many condos offer earthquake insurance, access to all of the property’s amenities, and regular garbage pickup as services that come with the HUA dues.
Will I Have To Pay A Special Assessment?
One of the ways that the condo pays for major repairs that insurance will not cover is through the monthly HUA dues. But when the HUA cannot cover the repairs, the HUA will send out a special assessment that every condo owner has to pay. For example, if the siding on one side of the condo is found to be in need of replacement, the cost might be $60,000.00. If the HUA only has $30,000.00 in the bank, then the condo owners will get a bill for the remaining $30,000.00 split up evenly between all of them. If there are 10 condo owners, then each owner will have to pay $3,000.00.
Before you buy a condo, ask if there are any special assessments coming up and how much the HUA thinks the assessments will cost. You will also want to ask when the last special assessment was to get an idea as to how often you will have to pay extra for expenses you did not expect. It is also a good idea to ask if the special assessments can be paid in installments, or if they need to be paid in a lump sum.
Is there a rental cap?
A condo with a rental cap means that only a certain amount of units can be rented out at one time. If a condo has a cap, you will have to put your unit on a waiting list to be able to rent it out at any point. If you never have any intention on renting out your condo, then this might not matter to you. But if you have a timeshare you like to visit a couple times a year and want to make an extra revenue by renting out your condo while you are gone, then this can be very important.
Just like with any other major residential investment, it is important to ask the right questions when you are considering buying a condo. Unless you get the information you need up front, you will never know if you are making a good investment.