10 Metrics To Review Before Buying A Condominium
When buying a condo, there are key metrics you should evaluate to ensure the property is a sound investment and fits your needs. Here are 10 critical metrics to review before making a purchase:
1. Homeowners Association (HOA) Fees
What it is: Monthly or annual fees paid to the condo’s HOA for the maintenance of common areas, amenities, and building upkeep.
Why it matters: High or unpredictable HOA fees can significantly increase your cost of living. You need to assess what the fees cover (e.g., landscaping, security, pools) and whether they’re reasonable compared to similar condos in the area.
2. HOA Financial Health
What it is: The financial status of the Homeowners Association, including its reserves and liabilities.
Why it matters: A well-funded HOA with sufficient reserves is better able to handle emergencies and capital improvements without passing surprise costs to owners. Review the HOA’s budget, financial statements, and reserve fund to ensure they’re financially stable.
3. Condo Rules and Restrictions
What it is: The bylaws and rules set by the HOA that dictate how residents can use the property.
Why it matters: Restrictions (e.g., on renting out your unit, pet ownership, or renovations) can impact your lifestyle and the resale value of the condo. Make sure the rules align with your long-term plans.
4. Owner-Occupancy Rate
What it is: The percentage of units in the building occupied by owners versus rented out.
Why it matters: A higher owner-occupancy rate indicates a more stable, community-focused environment and can make it easier to secure financing. Lenders often prefer buildings with more owner-occupied units, and a low rate could suggest issues with the building or HOA.
5. Reserve Fund
What it is: A savings account that the HOA uses to cover unexpected repairs, maintenance, and long-term improvements.
Why it matters: A condo building with a healthy reserve fund is better prepared to handle costly repairs without issuing special assessments (extra fees charged to owners). Ask for the latest reserve study to assess if the fund is adequately maintained.
6. Special Assessments
What it is: Extra fees charged by the HOA to owners for major repairs or capital improvements that aren’t covered by the reserve fund.
Why it matters: Frequent or upcoming special assessments can be a red flag that the building is not being properly maintained. Ask if there are any planned or past assessments and why they were necessary.
7. Building Maintenance and Condition
What it is: The current condition of the building and its systems (e.g., roofing, plumbing, HVAC).
Why it matters: A well-maintained building will likely have fewer future repair needs and will maintain its value. Request a building inspection or review recent reports to check for any upcoming major repairs that could be costly or disruptive.
8. Condo Appreciation History
What it is: The historical price appreciation (or depreciation) of condos in the building or complex.
Why it matters: Reviewing historical price trends helps you understand the potential for future growth in value. It’s a good indicator of whether the condo is a sound long-term investment.
9. Comparable Sales and Market Trends
What it is: A comparison of recent sales prices for similar condos in the same building and surrounding area.
Why it matters: Analyzing comparable sales (comps) will help you determine if the condo is priced fairly and whether the local market is trending upwards or downwards. It also helps in negotiation.
10. Insurance Coverage
What it is: The condo building's master insurance policy and any required additional coverage for individual units.
Why it matters: The HOA's insurance typically covers the structure and common areas, but you’ll need your own condo insurance for your unit. Verify what is covered and whether the master policy is adequate. Lack of sufficient insurance could lead to large personal liabilities in case of a major disaster.
By carefully reviewing these metrics, you can make a more informed and financially sound decision when purchasing a condo.
