Questions to ask when buying a condo
Questions you should ask before buying a condo
I write quite a bit about buying and remodeling condos, because they are the best way to get into the market in expensive cities. But what questions should you ask before you pull the trigger on that beautiful new home?
Although condos have the advantage of needing less maintenance than detached homes or townhomes -amongst other benefits- they also come with their own quirks and idiosyncrasies that are important to understand. So, what should you ask your real estate agent about before you buy the condo?
Buying a condo?
These are the questions you should ask before you do.
1. Has the unit itself been well taken care of?
Just like buying any other home, the first thing that you want to ask when you are buying a condo is whether the unit itself has been well taken care of. Go inside and take a look around.
How is the unit presented? Is it clean and tidy, or a bit of a mess? Remember, this is the owners presenting the best side of their unit, if it isn’t spotless they clearly did not care for it.
Do the floors and carpets need replacement? These can be big expenses.
Are the appliances in good working order, or will they need to be swapped with new units? Appliances are a big ticket item and you will need to account for that when purchasing.
Is the water heater modern, or nearing a time when it will need to be replaced? Water heaters only last for 15 years or so, and it’s not an item you want to have to replace right off the bat.
Is there mold? If so, please run away.
Are there leaks or water spots in the roof or on the walls? Again, please run away if so.
This is not an exhaustive list of things you should be looking for inside the unit, but it’s definitely a good start.
2. Are there lead paint, vinyl windows or popcorn ceiling?
A lot of older condos come with some issues that you will probably end up fixing (at large expense) at one point or another.
Lead paint is super common in condos built before 1978, and although it is generally harmless if you don’t eat the walls or any paint flakes that may fall off of them, it is an important consideration if you have children.
Vinyl windows are also incredibly common in older condos, although luckily most older condos have had them replaced by now. You can usually tell vinyl windows because they have bare metal frames around the outside, whereas more modern windows typically have white frames (they are still metal just not visibly so). If in doubt, ask your realtor. At some point vinyl windows will need to be replaced if you have them.
Popcorn ceiling is similar to lead paint in that you don’t HAVE to fix it, but you will probably want to. The disappointing thing about popcorn ceilings is that most of them before 1982 contained asbestos, so removing them can be riotously expensive. You need a team in hazmat suits to do it, and it cost me around $10 per square foot to get it removed from my condo. Costs have probably gone up since then, as well.
3. Has the building been well taken care of?
Although you will not have to personally pay for the maintenance and upkeep of the building, you are still technically responsible for a portion of the upkeep. For that reason, you definitely want to take a walk around the building and all of the common rooms before you buy your condo.
Do you see leaks or water damage?
Do you see mold or rot?
Are the carpets and common areas well presented?
Is the elevator old or recently replaced (note that you can’t always tell this by looking, you may have to ask)
Does it generally look “kept up” or is it unclean, messy, smelly, or otherwise unpleasant?
Are the siding, roof and parking lot in good condition?
If you see any problems, make sure to take note so you can ensure they are disclosed by the sellers and the association in the sellers disclosure documents.
3. Do you have the right documentation?
Although this is not an exhaustive list, you definitely want to be sure that you have all of the documentation that you need to make en educated decision about your condo purchase. This should include, but isn’t limited to the following:
Declaration of condominium
Articles of incorporation
Bylaws for the HOA
Rules of the Association
A copy of the most recent financial report for the HOA
The most recent investment, replacement or capital expenditure report (this is called many things in different places, but basically you are looking for the condo boards plans for spending over the next ten years)
A copy of the condominium governance report
Sellers disclosure statement
You might be in a little bit of a panic right now, because that is a lot of information! However, it is important to read through. There are a few things that you are trying to understand.
First of all, is the HOA well funded and can the building fund its own operations and replacements or renovations in the near to mid-term future? Second of all, is the condo well run and organized. If you are having trouble getting those documents or they don’t exist, it isn’t a great sign. Third, you want to know whether or not there is going to be a special assessment anytime soon.
4. Are there special assessments on the horizon?
A special assessment occurs when the balance in the HOA fund is not great enough to cover the necessary repairs or renovations to the building itself. For instance, if the condo needs new siding, the HOA fund has to pay for it.
If there is a special assessment currently on the unit, the seller is legally required to disclose this to you. But, you also want to be looking at plans that the building has for upkeep and replacement in the near future because they could trigger a special assessment as well. Elevators can cost $100-$500k to replace, for example, and it needs to happen at least once every 40 years. Food for thought, and also a great reason to avoid buildings with elevators!
5. Are you allowed to alter the things I will want to renovate or change?
Assuming your condo is well run, and well funded, but there are a few things you’d like to change about your condo, it’s important to look through the by laws and incorporation documents to make sure that you are allowed to make the changes that you want to make.
For instance, in my condo below you can see I put in hardwood floors. Not that big of a change, you would think. However, because the by laws in my building had very specific requirements for the amount of noise the hardwood floors could make, they had to be rated to a certain level and also needed to be installed with extra padding underneath them to ensure the neighbors below were not disturbed. This is the kind of stuff you would never think of asking about with a single family home, but it’s important in a condo.
Some HOAs simply don’t allow hardwood floors, or the alteration of walls or interior spaces, or the addition of in-unit laundry. Make sure whatever changes you want to make to your condo are possible!
6. What is the noise profile of the unit in relation to the other units?
Most condos share walls or floors with other units, just like apartment buildings. Before you buy, you want to be incredibly aware of what the noise profile in your unit will look like from day to day. Is your upstairs neighbors kitchen or living room above your bedroom? Does your bedroom wall border your neighbors bedroom wall ;) These are the kinds of things you want to know about.
You’ll also want to think the “best spot” in the building, which is generally a corner unit on the top floor. The worst spot, noise wise, is usually a middle floor bordering two or more units.
7. How are you going to do your laundry?
This one gets people all the time. If you don’t have in-unit laundry, you are going to want to know where the laundry room is in your building. You will also want to think about how many flights of stairs you will need to climb to do your laundry, and how many other people are sharing the same laundry machines.
There’s nothing worse then spending your Sunday going up and down flights of stairs, waiting for other people to finish their laundry, and then coming downstairs to find someone has piled your half dry underwear on top of the dryer.
Obviously, in-unit is preferred (and people will pay a premium for it). In many buildings you CANNOT renovate to add in-unit laundry, however, so if your unit doesn’t have it don’t think you can just add it on later.
8. What utilities will you be paying for?
One nice thing about condos is that the HOA will often pay water and garbage utilities, and sometimes even taxes. I have also seen HOAs that pay for internet or TV, pools, activities, etc. Although it sucks to have to pay an HOA fee, you do usually see something for your money.
Tips for making the most of your condo investment after you buy
Even after you’ve bought your condo, you're not quite finished asking questions: you always will want to be asking how much you owe and how much it is worth. Make sure to keep track of your costs for tax purposes and keep an eye on your properties market value.
Keep track of your investment
As you likely put a large amount of money into your condo, I highly advise you find a way to keep track of the value of your condo over time. I use the free tools at Personal Capital - they have a Zillow z-estimate connector to keep the valuation of your condo handy. Simply sign up for Personal Capital, then enter your home as a new asset. Then enter your mortgage as a separate account and you will see what I see in the image above.
Why do you want to track all of this? It's fairly simple - if you put too much money into a home, you can easily end up underwater. Make sure you know where you stand.
Know your tax deductions, particularly if you are renting out your new condo
If you are planning on renting out your condo, make sure you keep track of every single expense! You can depreciate the cost of your condo over the next 27.5 years, and significantly reduce any tax you may owe due to your rental income. Depreciating the cost of our renovation gives us about $4,000 a year in rental income that we don't have to worry about paying income taxes on ($100k/27=$4k~).
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