Brief Summary
This video discusses why buying a condominium might not be a good investment. It covers several drawbacks, including high and rising HOA fees, restrictions and rules imposed by condo associations, the potential for special assessments, noise and lack of privacy, and challenges with appreciation and resale. The video concludes with tips for those who must buy a condo, focusing on financial investigation and awareness of rental situations within the building.
- High and rising HOA fees can make condos unaffordable.
- Restrictions and rules limit freedom in decorating and renovations.
- Special assessments can lead to unexpected and large expenses.
- Noise and lack of privacy due to thin walls and shared spaces.
- Slower appreciation and resale challenges compared to single-family homes.
The video starts by questioning the safety and affordability of investing in condominiums, suggesting that condos are receiving negative attention and may not be as affordable as commonly believed. The presenter outlines the topics to be covered, including HOA fees, rules, restrictions, and provides tips for those who must purchase a condo despite the drawbacks.
The first major drawback of buying a condo is the high and rising Homeowners Association (HOA) fees. Examples from Florida, Minnesota, and Colorado illustrate significant increases in HOA fees, driven by rising insurance rates and other factors. In Minnesota, fees rose from $240 to $370 per month, while in Colorado, they surged from $300 to $820 per month. Some homeowners in Jacksonville, Florida, with one-bedroom condos face fees exceeding $500 per month, creating affordability challenges, especially for those on fixed incomes.
Condo associations often impose numerous restrictions and rules that limit homeowners' freedom. These can range from regulations on exterior decorations and flags to strict guidelines on renovations and pet ownership. The lack of freedom to decorate as desired or make renovations without adhering to strict rules is a significant drawback for many potential buyers.
Special assessments are extra fees that HOAs can charge if reserve funds are insufficient. These fees can cover major repairs like repaving parking lots. Florida homeowners, in particular, face substantial special assessments due to new structural safety laws enacted after the Surfside building collapse in 2021. Some homeowners are hit with assessments as high as $100,000, creating severe financial strain and prompting many to sell their condos.
Poor construction in many condo buildings leads to thin walls, resulting in noise issues and reduced privacy. Residents may overhear neighbors, and private activities on decks or patios can be easily overheard, diminishing the quality of life for condo owners.
Condos typically appreciate slower and less than single-family homes, partly because buyers prefer single-family homes to avoid HOA fees and invest in their own properties. The absence of land value in condos also contributes to slower appreciation. In January of the current year, condo sales prices rose only 6% year-over-year nationally. Resale challenges arise from a limited buyer pool and financing restrictions. For instance, buyers needing FHA loans can only purchase condos in FHA-approved buildings, limiting options for both buyers and sellers. A HUD Search tool can help determine if a condo building is FHA-approved.
For those who must buy a condo, the video offers several tips to mitigate potential financial issues. It's recommended to buy a unit on the top floor to minimize noise from above. Investigating the HOA's financials, including reserve funds, assessments, and upcoming projects, is crucial. Reviewing the history of HOA fee increases helps in financial preparation. Additionally, it's important to inquire about the management company's location and, most importantly, to determine the percentage of rentals, especially Airbnb rentals, in the building, as a high number of rentals can impact the living environment.
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Transcript
Full transcript of “NEVER Buy a Condo”. Click a timestamp to open the video at that moment. Need another video? Use the YouTube transcript generator.
0:00 how's about investing in Condominiums it's safe Condominiums safe investment I don't think so I know many think that a condo is a more affordable option but nowadays condos are getting a pretty bad wrap and they're not so affordable I'm going to tell you why I think you should never buy a condo in this video I'm going to tell you all the drawbacks about buying a condo we're going to talk about how expensive the HOA fees are the rules the restrictions and everything else in between if you have no other option but you have to buy a condo I'm going to share some tips with you in the end to tell you what you should be looking out for if you find yourself you have to buy a condo so let's get into this right now shall we the first reason why I would never buy a condo you got it
0:46 those HOA fees now I'm sure you've been seeing a lot of news lately especially down in Florida where people are just not able to afford their condos anymore because of the rising HOA fees this is what's causing these fees to Skyrocket and it's not just happening in Florida it's happening in other states across the country for example there's a community in Minnesota where these homeowners saw their HOA fees go up from $240 a month to 370 it went up another $130 a month more than double like why would you do that but again it's the insurance rates this is what's causing it another example is in Colorado in Castle Rock there was a community they saw their HOA fees go up from $300 a month to are you ready $820 a month oh my gosh like how can one
1:34 afford that and such a huge increase all at once in Jacksonville Florida there was a community where homeowners had like one-bedroom condos and their fees are over $500 a month there's a lot of people that live in that building on a fixed income and it's becoming very challenging for them to afford it and to be able to live so these Rising HOA fees yeah that is definitely one reason why I would never buy a condo the next reason restrictions and rules now you hear all these crazy stories about you know the HOA kons going after homeowners about like you know having lights hanging out on front of their house or a flag hanging out in front of their house that's something that it's not for everybody right and some condo associations they have rules even regarding Renovations and even pets some
2:21 places don't even want you to have a pet in your place so because of these rules and restrictions you know you have a lack of Freedom you have a lack of freedom to to decorate a place how you want you if you want to put like nice stuff out on your lawn in your front yard HOA may be coming along and telling you to take it down and let's talk about the renovations if you want to renovate your condo a certain way you got to follow those rules and restrictions and make sure that you're making those Renovations according to what those rules and restrictions are again that lack of Freedom that's a big problem and uh yeah that's another reason why I would never buy a condo the next reason is this is another big one the potential for special assessments a special assessment fee is an extra fee that the HOA can charge if there's insufficient funds in the reserves yeah they can do
3:09 that so for example if the parking lot needs to be repaved there's not enough money guess who's paying for that you are and these assessment fees you could either pay them in one lump sum or you can break it out over monthly payment and it can be paid over a number of years now Florida getting back to Florida I feel bad for these people in Florida they are experiencing the largest special assessments now you're all aware of that collapse at the Surf Side building back in 2021 where unfortunately 98 people were killed but because of that Florida now implemented a state law that's a structural safety law that's forcing all these buildings to now Implement all these new safety regulations and safety features now some homeowners are actually hit with special assessments to the tune of
3:56 $100,000 oh my word so now this is put severe Financial pressure on these homeowners and now a lot of these people in Florida are trying to offload these condos they want to get out because they can't afford it these special assessments they could be a big problem and that's another reason why I would never buy a condo another reason why I would never buy a condo yeah it's the noise and the lack of privacy now look we all know a lot of these buildings are not constructed very well so the walls can be very thin and you really don't want to hear what your nextd door neighbor is doing so this is a problem if you want to be dealing with that and also the Privacy too so if you want to go hang out on your back deck and say enjoy a cocktail or you know have your morning coffee or even just chat on the
4:41 phone like with your friend and your next door neighbors are on their deck next door yeah that's not fun so that's another reason why I would never buy a condo yeah I don't need to be listening to my neighbors and I don't need to be sharing my conversation and what have you if I'm hanging out on my back deck and enjoying myself I don't need to be worried about the people living next door to me listening in on everything so yeah good morning my neighbors I just want to take a quick second to let you know that if you are in need of a real estate agent in your part of the country and you can't find one click the link Down Below in the description box fill out the form and I will get back to you within 24 hours I'm connected to tons of Agents around this country and I would be happy to help get you connected to one in your Market another reason why I would never buy a condo is the lack of
5:28 appreciation and the resale challenges now we all know condos tend to appreciate slower and less than a single family home now part of that being is that most people would rather buy a single family home because they don't want to deal with the HOA fees they'd rather take that money and invest it into their own Renovations into their own home they don't want to be slapped with the you know3 to $500 or more HOA fee every month another reason why they don't appreciate as quickly as a single family home is because there's no land yet single family homes tend to appreciate more because of the land value so because there's no land in the condo they don't appreciate as much so just to give you an example in January of this year the meeting sales price for condos Nationwide only Rose 6% year-over-year compared to January of
6:13 2023 so that shows you right there that you know they don't appreciate as much or as quickly as a single family home so if you find yourself you're buying it and then to turn around sell it in like 5 years or so don't expect that price to be as high as you would find a single family home it just doesn't work that way let's talk about the resale challenges now people are going to be leaning more towards a single family home you're limiting your buyer pool okay so there is going to be limited people who are actually going to want to live in a condo and want to pay the HOA fees the other challenge is it's limiting financing options for buyers to purchase a condo what I mean by that is if somebody needs an FHA loan they can only qualify for an FHA loan they're not going to be able to buy a condo unless that Condo building is approved d by FHA
7:01 so these condo buildings must adhere to the FHA financing guidelines and then they go through a whole process they'll get approved and then people with FHA Loans will be able to buy a condo in that building if you want to know where you can find out if a Condo building is FHA approved there's a HUD Search tool where you could just put in a zip code you put in the condo name the state the zip code and it will tell you if that Condo building is approved by FH ha so basically if someone wants to buy a condo and your place is not FHA approved only people can with a conventional loan or cash are going to be able to purchase the condo so because of those reasons those right there yeah I I would never buy a condo because that's just going to be challenging to resell it now if you
7:48 find yourself in a situation where you have no choice you have to buy a condo look I get it and you know yeah I'm giving you all the reasons not to buy one but look I'm being real here I'll tell you that you can still buy one but here are some things that you need to consider if you're going to be buying a condo and this is to help protect you from like future Financial issues once you're in that condo now doing my research online this was a common thing that came up if you're going to buy a condo people recommend try to buy a condo on the top floor why because you're limited on the noise so if you're say if you're second floor first floor whatever third floor they places four floors you're going to hear the noise above you so they always recommend to get the unit on the top floor the other thing you want to
8:34 consider that the mo probably the most important thing you want to look at is you want to investigate that HOA you want to take a look at the financials you want to see how much is in the reserves if there's any assessments you want to know are there any future projects that are upcoming to the community and if there's going to be a special assessment for that you also want to ask to see the history of the HOA increases you want to see how much these fees have been going up per year so you can prepare yourself financially you also want to inquire about the management company so are they local or they on site or they like 100 miles away and I think the most important thing you have to look at when you're buying a condo you got to find out if that building has a large number of rentals or Airbnb rentals that can become a
9:19 problem for you if you don't want to be surrounded by people coming and going that are renting an Airbnb that could be an issue definitely look at that before you even consider purchasing if this was my permanent residence and I was surrounded by Airbnb rentals I don't know if I would be comfortable with that so look into that see what the percentage of rentals into Airbnb rentals are in that building if you also want to know like what types of houses you should never buy I highly recommend you watch this video right here thank you so much for watching me today to get your dose of real estate reality my name is Jackie Baker and I will see you next time
