Condos,
Apartments & Single-Family Homes - Q & A
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Q:
How
do you choose between condos and single-family
homes?
A:
Using
appreciation as a measure, condominiums in some
areas have been as profitable an investment as
single-family homes in the last five years. And
in some markets, condos appreciated even more,
according to some experts.
While
single-family homes have been the preferred
investment by home buyers, changing demographics
are helping make condos more popular, especially
among single home buyers, empty nesters and
first-time buyers in high-priced markets.
Also,
the condominium community has worked hard in
the last few years to overcome image problems
brought on by homeowners association and developer
disputes as well as all too frequent construction-defect
litigation.
Q:
Are
condominiums risky to buy?
A:
While
condos never had the kind of appreciation experienced
by single-family homes in the go-go 1980s, most
ultimately have not lost value, say some experts.
And with high prices in many urban markets and
more single home buyers in the market than ever
before, the market for condos is strong.
As
with any home purchase, you should do your homework
about the neighborhood or development before
you buy. In the case of condominiums, it is
important to read the past six months of homeowners
association minutes to see how effective the
board is and to learn about any possibly detracting
issues (such as protracted litigation with the
developer).
The
condominium community has worked hard in the
last few years to overcome image problems brought
on by disputes and lawsuits. Associations are
becoming more sophisticated about property management
and taking steps to prevent legal problems and
disputes.
Other
resources:
* Community Associations Institute, 225 Reinekers
Lane, Suite 300, Alexandria, VA 22314; (703)
548-8600; www.caionline.org.
* "The Condominium Bluebook," Branden
E. Bickel, Piedmont Press; 2003; www.condobook.com.
Q:
What
do you think of a vacation home as an investment?
A:
You
can buy a vacation home today for investment purposes
as well as enjoyment. And yes, there are tax benefits.
Some
people buy a vacation home to use as a permanent
retirement home later, which allows them to
get ahead on their payments. Another benefit
is that the interest and property taxes on a
vacation home are tax-deductible.
Some
real estate experts predict that vacation homes
will appreciate in value due to rising demand
from the aging Baby Boom generation. You also
can depreciate the property if you live in the
house less than 14 days a year, or 10 percent
of the number of rented days - whichever is
greater.
You
also need to consider whether you can afford
to carry two mortgages, pay for the extra utilities
and maintenance costs, and how this investment
fits into your total personal finance picture.
Q:
What
do you think of get-rich-quick real estate schemes?
A:
Most
real estate experts say there is no such thing
as getting rich quick in real estate. But there
are no end of get-rich-quick programs presented
to the public as alternative methods of buying
real estate. Some are reputable while others depend
on your financial circumstances to work. A handful
are simply scams.
Many
get-rich-on-real-estate programs offer advice
on how to buy government foreclosure properties
and participate in other government programs.
Most of this information can be obtained by
calling the government offices involved directly.
Anyone
interested in real estate investments would
be wise to explore a variety of sources. Most
investors view real estate as a long-term investment.
Deals that sound too good to be true often are.
Q:
Do
condos have to be made accessible to the disabled?
A:
The
1990 Americans with Disabilities Act does not
require strictly residential apartments and single-family
homes to be made accessible. But all new construction
of public accommodations or commercial projects
(such as a government building or a shopping mall)
must be accessible. New multi-family construction
also falls into this category.
In
all states, the Federal Fair Housing Act provides
protection against discrimination for people
with physical or mental disabilities. Discrimination
includes the refusal to make reasonable modifications
to buildings that aren't accessible to the disabled.
Two
educational brochures, "Housing Rights"
and "Discrimination is Against the Law,"
are available through the Department of Fair
Employment and Housing by calling (916) 227-0551.
California residents can dial toll free (800)
884-1684; www.dfeh.ca.gov.
Q:
Can
condos ban smoking?
A:
A
homeowners association's board of directors can
restrict smoking if it applies to indoor common
spaces such as hallways or recreation rooms. Outdoor
spaces are a different story, say legal experts.
Any restriction would probably hinge on local
laws (i.e. if a city banned smoking outdoors,
a homeowners association probably could restrict
smoking in its outdoor spaces).
Typical
covenants, codes and restrictions (CC&Rs),
which govern condo associations, give the board
authority to make and enforce reasonable rules
for the use of common property. But that would
not apply to interior spaces owned by smokers
themselves.
Resources:
* Common-interest development brochure available
free from California Department of Real Estate,
Book Orders, P.O. Box 187006, Sacramento, CA
95818-7006; (916) 227-0852; www.dre.ca.gov.
* Various Internet sites specializing in common-interest
developments, such as those operated by the
Community Associations Institute and CIDNetworks.
Q:
Are
condos a good investment?
A:
Condominiums
have held their value as an investment despite
economic downturns and problems with some associations.
In fact, condos have appreciated more in the last
few years than when they first came on the scene
in the late 1970s and early 1980s, experts say.
While
there are lots of reports about homeowners association
disputes and construction-defect problems, the
industry has worked hard to turn its image around.
Elected volunteers who serve on association
boards are better trained at handling complex
budget and legal issues, for example, while
many boards go to great lengths to avoid the
kind of protracted and expensive litigation
that has hurt resale value in the past.
Meanwhile,
changing demographics are making condominiums
more attractive investments for single home
buyers, empty nesters and first-time buyers
in expensive markets.
Q:
How
do I project rents on a rental?
A:
If
you are buying a rental income property and applying
for a loan to do so, the lender will require an
area rent survey by a certified appraiser. The
amount a landlord can expect to receive in monthly
rent largely depends on what the property has
rented for in the past, the condition of the building,
its location and the current housing market.
Lenders
also look at other cash-flow considerations.
They want to know if you have enough reserves
on hand to cover predictable and unforeseen
expenses, such as property insurance, taxes,
regular maintenance and repairs.
Q:
Are
one-bedroom condominiums a good investment?
A:
One-bedroom condominiums historically have not
been considered as good an investment as condos
with two bedrooms or more. But in high-cost markets,
such as Manhattan or the San Francisco Bay Area,
one-bedroom condos have proven to be equally good
investments. Helping that along are changping
demographic trends. With more single home buyers
in the market today than at any time in history,
there is more demand for one-bedroom condos.
Q:
How
do I figure out the homeowners association?
A:
Learn
everything you can about the homeowners association
before you buy into a development governed by
one. The association's financial, political and
legal conditions are very important to your investment
and quality of life.
When
run properly, homeowners associations maintain
the common grounds and keep civility in the
complex. If you follow the rules, the association
should not intrude on your privacy or cost you
too much in association dues.
Poorly
managed associations can drag down property
values and make living there difficult for residents.
Start by studying the association?s covenants,
codes and restrictions, or CC&Rs, and find
out if you can live by them. For example, if
the rules prohibit loud music after a certain
hour and you like to play your CDs late at night,
this may not be the place for you. Don't move
in thinking you can get away with violating
the rules or change them later because you may
find yourself in turmoil with determined neighbors
firmly in control of the association board.
Find
out all you can about the association's finances.
Beyond reviewing the budget, talk to the association
treasurer and find out if dues are expected
to increase and if any special assessments are
planned. Ask if special inspections have revealed
problems with roofs or plumbing that may cause
a dues hike or special assessment later on.
Call
and meet with the association president. If
you are the type of person who despises intrusions
into your private life and the president seems
more interested in gossip about the residents
than maintaining the property, this may not
be the right condo complex for you.
Speak
with residents to get their views on the association's
finances, its property manager, how it operates
and any politics. Associations are volunteer
organizations with elected boards, like a mini-government,
so politics can enter the picture and spoil
a good thing.
Lastly,
take some time to understand how homeowners
associations are organized and how they conduct
business. Like all real estate investments,
the more you know the better off you are.
