When is a condo a bad investment?

Marco:  Question for you--if you had a choice between investing in a small house, or investing in a condo, which one would you choose? Will Nesbitt: As a rental, I might do a condo, if it's a well-managed association, because there are few hassles. But it's more complicated than that. Feel free to call me if you want to download the full lecture. Marco: Here's the situation: My parents are retiring and need a place to live. They'd like to live in Northern Virginia. They have a sizable down payment but bad credit, so we have offered to buy them a little house. We're somewhat limited in what we can get because of Mom's health issues---they need a place that has at least 2 bedrooms, 2 baths, all on one level and wide hallways because she will eventually be in a wheelchair. I think they'd be happier in a house because they haven't lived in an apartment ever. But we're having a hard time finding the "right" house and they're on a deadline to move out of the parsonage they're in. They were looking at a condo in an outlying suburb, but Paul doesn't want to buy a condo. He doesn't feel like it will keep its value. Will: That's something that comes up from time to time when you talk about purchasing a condo.  There are no hard and fast rules that apply to all condos everywhere, but I'll share a few of the lessons of my experience.

Location. Yes, we've all heard "location, location, location" when it comes to real estate, and of course most of what you've heard is probably true.  But here's my take on it when it comes to valuing a condominium property: if the property is in a highly desirable location the property will hold its value.  There are only so many places to live within walking distance of a Metro in Northern Virginia.  Until the day people stop using the Metro those properties will retain a measure of demand.  Condos on the perimeter, condos at the periphery, condos that entice the buyer with a low price, won't keep pace with increases in other communities and worse yet, can lose value.  So ask yourself is, is the appeal of this condo that has a fantastic location or is the appeal that the condo is cheap? Lesson: If the price and not the location is the primary driver in the purchase, then this condo might not be a good investment. Management. Condos are managed by an all-volunteer board of directors elected by the community. Some boards are thoughtful, logical, practical and deliberate.  Some boards are incompetent, petty, well-intentioned or corrupt.  Take a hard look at the condominium documents before you buy your condominium. If you see that the board has repeatedly directed large amounts of funds to the same contractor you might want to dig a little deeper.  If you see that the board has repeatedly spent money on frivolous expenses, that might give you reason to pause.  If the board has just authorized a large contract for debt to pay for bills the association cannot afford, that might give you reason to move on to the next opportunity. Lesson: The condominium management can make or break the community. Condo Fee. Let's start with this premise: every property owner everywhere pays a condo fee.  This is true once you realize that utilities and building maintenance are condo fees. An owner of a single-family home might pay zero condo fees for 10 months and then pay a $15,000 condo fee for a roof repair.  But a well-managed condo association puts money in reserves to prepare for future problems when they arise.  A condo owner doesn't get bogged down in details of property management, but a home owner usually spends money more efficiently than a democratically elected board. Lesson: Condo fees are not a problem.  Poor management of maintenance and utilities is a problem no matter if you have 1 member or 1500 members in your association. Bottom Line. "Location. Location. Management." If your property is located in a less than desirable neighborhood, don't expect the property to appreciate. (That doesn't means the property is a bad-buy for you or for some people, it just means don't count on appreciation from this investment.) You can minimize your exposure by picking properties that are in highly desirable locations, even if they are smaller or more costly per square-foot. But when it comes to condos, property management is almost as important as location.  A poorly management property can deteriorates or can have high condo fees, or worst of all, a poorly managed property can have both a poor condition and high fees.  Nothing will kill your value faster than condo fees which are not justifiable. You can minimize your exposure to the risk of management incompetence by purchasing in condominiums with minimal amenites, no elevators, common areas that are open to the elements, etc. “Using a real estate agent is a very good idea,” says the U.S. Department of Housing and Urban Development (HUD). "All the details involved in home buying [and selling], particularly the financial ones, can be mind-boggling. A good professional can guide you through the entire process and make the experience much easier." Selecting the right professional is the key to a successful real estate transaction. Better than working with a simple real estate agent, you’ll want the services of a Realtor®.

What’s the Difference Between a Real Estate Agent and a Realtor?

More than two million people have earned real estate licenses but only a small percentage of these are Realtors. Realtors are members in good standing of the National Association of Realtors, their state association of Realtors and a local real estate board. Realtors are held to high standards of ethical behavior and must undergo continuing education annually to remain accredited. All agents of Nesbitt Realty are Realtors!

What Does a Realtor Do?

Realtors in {Location_Name} are required by law to:

• perform necessary and customary acts to assist in the purchase or sale of real estate.
• perform these acts in good faith and with reasonable care.
• properly account for money or other property placed in his or her care.
• disclose “adverse material facts” which are, or should be, within the agent’s knowledge.

Realtors can help buyers pre-qualify for mortgages and keep abreast of the latest home listings. They can assist sellers in preparing their homes and screening potential buyers. They can show investors the properties that fit their risk profiles and long-term investment strategies. Nesbitt Realty in {Location_Name} can quickly locate the perfect home for you, or sell your home in the shortest possible time frame. Our agents can efficiently organize and coordinate meetings with potential buyers and sellers. A Nesbitt Realty Realtor will be well acquainted with the important things you'll want to know about the neighborhood you may be considering:

• the quality of schools,
• the safety of the community,
• traffic volume,
• price,
• Metro accessibility
• nearby parks and attractions

Our agents have immediate access to homes as soon as they are put on the market, saving you hours of wasted drive-around time. When you’re ready to make an offer on a house, our Realtor will help structure the deal to save you money. He or she will explain the advantages and disadvantages of different types of mortgages and guide you through the mounds of paperwork. When it comes to selling your home, a Realtor will save you time and aggravation. Their commission will vary depending on your location. Realtors pay for all advertising, schedule all open houses and make sure potential buyers are qualified. The money they can save you is often more than the cost of their commissions. For more information or to set up an appointment call Nesbitt Realty at (703)765-0300.