Ups and Downs of Condo Living

With the market being as high of a price point as it at the moment more and more people are looking at purchasing a condo instead of a detached house as, frankly it’s the easiest way to become a home owner without extremely high monthly payments.

I see a variety of different reasons people want a condo; first time buyers, investors and baby boomers wanting to downsize. All of these groups are looking at the same thing, but for different motivations.

Before we begin, a few definitions: In the Okanagan the description is a Strata. This can be low-rise buildings, townhouses, duplexes, triplexes or "mixed use" buildings, such as condos above offices or store fronts. Often the term Condo is used interchangeably with Strata.

What makes strata different from freehold houses is that you own your unit but you also share ownership of the land, building and common areas. You share costs with fellow members of your condo association, and the board of directors or a property management company makes the big decisions instead of you.

The benefits of condo living

1. Lifestyle. Condos are often more central in location and the common areas like pools and rec rooms offer opportunities without the maintenance and cost per square foot. For others the appeal is the social opportunities, you see a lot more people in your day to day activities.

2. Most major costs are shared. Strata have a reserve fund, by law. This means they collect monthly fees and try and manage this money to cover off any planned longer term expenses. This means you only need to focus on your immediate unit, no yard work, no pool maintenance…

3. Amenities. A fair amount of condos offer benefits not usually seen in homes such as a theatre room, swimming pool, games/party room and a gym.

4. Location.In a lot of larger cities if you’re craving a prime spot – Vancouver as an example – condos may be the most practical location for you. The trade off in space gives you access to work, dining and other core city activities that appeal to many.

5. Outside work is sorted for you. One of the largest draws of condo ownership is freedom from maintenance. Shoveling snow, mowing the lawn and the likes are no more!

6. Price. In most locations condos are more affordable than owning a freehold home. Often a mortgage plus strata fees is the same or less than the average costs of rent.

7. Customization. Instead of renting if you own a unit you can paint and renovate as you wish.

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The potential downside

1. Price. In some cases, moving to a condo doesn’t necessarily mean downsizing mean downsizing to a cheaper home – especially if you’re upsizing the luxury.

2. Appreciation. In some areas you do not see the same appreciation on a condo over time as you would with a house. You may want to compare past real estate prices in your area to see how the numbers compare. In Condos various repairs and renovations typically do not have as much of an impact on price as detached homes. This is because of all the comparables in the building or area.

3. Condo fees. If you are buying cash or have payed off your mortgage, in a condo you are still paying the strata fees. If you plan in advance this is not an issue, so plan ahead. Monthly condo fees can range from $200 to $600 depending on where you live. Condo fees typically increase over time and are not likely to go down again. At a certain market price sellers start to have to discount the listing price to offset the high strata to draw in buyers.

4. It’s all on you. Yes, you can paint your walls and renovate as you wish, but you are also responsible for repairs inside your unit. Be very clear on the strata documents to know what you are responsible for versus the condo board.

5. Others people’s problems can become yours. Sharing costs can be a good thing, but the downside is you pay for your share of the problems. If common areas are damaged, the pool, you pay. If someone sues the strata, you pay. Some are good neighbours, some are not.

6. Delinquency. Condo owners can be hit by a recession. As more people struggle to make ends meet, more condo owners drop out of paying their association dues. If this happens, the costs are now covered by fewer. You get nothing out of the sale proceeds and your share gets a bit larger.

7. Levies (special assessments). When a condo is mismanaged and runs low on money, you can be billed. Any shortfalls for any reason can be imposed as a levy onto all the owners.

8. Bylaws. For everyone in the building or area to get along you have rules. More rules then are needed in a detached house. Noise restrictions, garbage disposal, fixtures and other common area rules apply. Ensure you know the rules before you buy. You also have limited control of the rule that are created.

Tips for first time condo buyers

1. Get help. Real estate agents and lawyers are a lot more familiar with the process and pitfalls or the various strata methods. Even do it yourself people can be challenged to know all of the nuances of strata life. This expertise further helps to minimize your risk. Some resist paying these fess but quickly realize that one or two special levies and they are a lot more into a building then had they worked with the right support.

2. Learn the difference between tenants in common and joint tenancy. They sound the same but the implications are dramatically different between these two.

3. Get as much information as possible before you decide. Compare condo fees, learn the rental rules, bylaws and regulations, reserve fund, what levies have been passed and what are the insurance requirements?

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