View Full Version : City Living Condo Ownership Without The Pitfalls? A Possible Answer.
Here is the problem:
How do you buy a condo in a major city and actually get the benefits of living there long-term with a paid off home BUT ALSO AVOID the possiblity of the neighbhorhood changing on you too much or going bad (city neighborhoods change constantly). I struggle with this question as I second guess whether I should be paying extra to my condo mortgage to get it all paid off.
Here is a possible answer.
If the neighborhood goes bad or the building is no longer cool and all, then you simply rent out your paid condo and then use that rent money to rent a place of your own where you want. This way, you charge the going rate for rent and you also spend the going rate for rent. You enjoy the ability to not have to match current market rents as you are basically living off your paid set in stone priced condo.
The negatives are that your current place may not gain as much rent as where you want and also, the condo fees may not be in a good situation. (too high or not enough owners paying their share, etc.).
ugh.
I do not know what to do.
I wonder if I should just rent forever. Does condo ownership ever work out long term?
What you want is no risk. There is long term risk in any purchase.
City neighborhoods can change for the better. Ours in the 80s was a drug and crime haven. Activists got involved with the police and moved their police station to a free building right in the middle of the neighborhood. Got historic designation. Block by block it gentrified and with the latest gas increase, downtown is the place to be for the young and empty nesters. We had a building boom in the late 90s and on and now it is one of the 5 or so neighborhoods that are "cool". I moved there in 2000 since it was within walking distance to each of our jobs. Almost every available lot is filled with new custom homes or rows of townhouses. New apartments are being built right now.
In the housing crisis, sales stopped and prices stagnated but they have now started again in a pretty amazing way. Anything (condo and house) halfway affordable, and downtown that means less than $400,000, sells almost immediately. We do have $100,000 condos also just to show that we are affordable to most. It also helps that we are close to a huge medical and university complex that is also expanding.
You can still have risk by buying into a building with its own issues. There is a wonderfully located building I would love to live in but they cannot get together to repair the building to historic requirements and so let it deteriorate. One owner in such a condo is stuck with the poor decisions of the others.
You can reduce the risks by getting into a building that is well kept up. Avoid buildings with aluminum wiring. Check police/fire reports for the building and nearby.
Check neighborhoods around 10-11 pm to see what the noise is like. Noise sources may be far away and nonobvious. One house we lived in was about a mile from a nightclub that did outdoor concerts. The terrain provided a natural amphitheater effect and a lso had a lot of rock close to the surface. So we were often kept awake from 11pm-2am by the loud music. The cranked up base traveled through the rock and shook the house. Occasionally the music was actually good though so the concert was enjoyable if ill timed.
Also once lived in a place where a railroad crossing was about 4 miles away, but the acoustics were such that the middle of the night train whistles sounded like the train was in the house.
Try to get something with a south facing patio or balcony where you are allowed to have plants on it so you can grow some of your food there. East or West facing is workable, but avoid north facing.
Then work with neighbors all around the neighborhood to create groups that keep the neighborhood working in a positive direction such as
Relocalization
Food gardens and edible landscaping
CSA delivery points
Urban beekeeping
Book clubs
Supper clubs
Needlework groups
Zero waste strategies
Attracting desired businesses
Musical lunch breaks
Playgroups
Skill classes
I wonder if I should just rent forever. Does condo ownership ever work out long term?
As sweetana said, condo ownership (actually, home ownership in general) is not risk-free. If you're looking for risk-free, renting is the way to go. If the neighborhood goes to pot or the building deteriorates or your financial situation changes such that you need to find cheaper rent, renting makes it easier to get out. On the other hand, you will pay every dollar of what it costs to maintain your building (and then some) but you won't participate in any capital appreciation.
A couple of tips from which I've benefitted:
- Do some research. Check out the local newspaper (not the big-city daily, but the paper they usually have in racks at businesses near the target condo. Look in the library or on-line, if you can, to go back a couple of years. Typically these smaller papers will discuss zoning and neighborhood issues which won't hit print in the bigger papers. You'll get a feeling for home values on the rise (or fall), plans for redevelopment (which you may or may not like), crime statistics, etc. This is a big purchase yet most people seem to do more research on new cars and toasters.
- Ask the seller/RE agent to see the condo association by-laws and balance sheet. Ask about any current special assessments. Make sure you can live with the by-laws. Look at the balance sheet to see if there is enough being accumulated from condo fees to handle expensive long-term preservation work, like a new roof when it's needed. Low condo fees may seem attractive, but they won't be when your condo value takes a hit of several thousand dollars because of lack of upkeep.
- Don't forget that being a landlord (renting out your condo) has its costs. First, it may not be possible according to the by-laws. Second, either you will have to find tenants or hire someone who can. Either way costs money for credit checks or the service offered, etc. Third, unless you continue to pay the property-management company a cut of your rent, the tenants will call you when there's something wrong -- and expect you to get it fixed. Fourth, rent goes up and down with demand, and you may find that you can't rent the place at the money you need to service the mortgage and other costs. Finally, tenants sometimes choose to engage in illegal activities. Or stop paying rent. Or skip town. Or trash the place. Or all of the above. You can minimize this with good tenants, but -- again -- there are no guarantees.
I didn't marry my wife after our first date and even after a year or more of dating there was still a chance that our marriage wouldn't make it. There is risk involved in everything that also offers a (possible) reward. If you're not comfortable with the risk there is nothing at all wrong with renting. If the neighborhood starts heading downhill you just give your notice and move to one that's headed the other way. Risk tolerance is, or at least should be, one of the primary considerations before making any investment. It makes no difference what anyone else thinks, you just need to know how comfortable you are with it.
You might want to think a little more about the renting it out idea, too. If the neighborhood is sliding downhill consider who you might have to choose from for tenants, how they might care for your place, how easy will it be to collect rent, etc. Like Steve said, being a landlord is work even in the best of situations.
I just moved out of a condo I rented for three years. They were an eight minute walk from downtown; had a nice treed grassy area and tree-lined street and near the river and walking trail. Perfect location for me. Taking into account the sales price for same type units, the property taxes and the monthly condo fees,it would have cost me twice as much to live there as to rent. Pretty amazing. The condo's are about 15 years old and you can see that maintenance issues are coming, i.e. the covered parking (under a grassy knoll) keeps having leaking problems, seeing rust on deck metal, probably almost time to paint them again. I'm glad not to be on the line for the fees coming up ahead. I don't know how solid the association is. They might be fine but I was glad to be outside it.
ToomuchStuff
8-21-12, 1:24pm
Even renting has risk. Fire, theft, landlord losing the home, neighbors, etc. Housing shifts, there is no two ways about it. Look at high end homes from 10, 30 and 50 years ago, and the neighborhoods where they are. While some neighborhoods may still be in good condition (historic districts, etc), the homes themselves may make you think twice about living there (poor layout, outdated, plumbing/electrical issues, etc). Also too many people have the false impression that when they retire, all this stuff will get done or updated. They forget they will now be watching outgo a lot more since less income and they won't have as much energy. It is unrealistic to expect a way to get the good, without the bad.
I wonder if I should just rent forever. Does condo ownership ever work out long term?
Sorry - no suggestions for you as I am in the same boat. Don't really like home or condo ownership and would prefer to just rent forever but I know that isn't always the most financially prudent thing to do. I hate the whole condo situation - the costs, the governance by a board, the rules. But I hate having to be responsiable for all the maintenance and repairs (some very large) of owning my own home. Really just want a place that I can lock the door and leave for 6 months out of each year and never have to worry about or care for. So far renting has been the best solution for my lifestyle as I can rent in one place for 6 months and then just leave when I want to travel the other 6 months. But I do like having a home base - just haven't found one that works for me yet. Probably the best would be a tiny house on a tiny lot and a house sitter/caretaker for when I was gone - or a paying roommate - as I'm not sure I could handle all the potential problems with condo ownership. I personally think that those potential problems outweight the benefits. For now I'll continue renting.
Here's my suggestion: once you live somewhere, you are a part of the neighborhood. Jump in! Get to know people, affect the quality of life there. Neighborhoods "go bad" when neighbors don't take care of them.
"I wonder if I should just rent forever. Does condo ownership ever work out long term?"
It can. My SO has had his for 25 years or so, with few problems. It's a small complex, conveniently located and well-maintained--but it's located in a first-ring suburb, not in the city.
Sorry - no suggestions for you as I am in the same boat. Don't really like home or condo ownership and would prefer to just rent forever but I know that isn't always the most financially prudent thing to do. I hate the whole condo situation - the costs, the governance by a board, the rules. But I hate having to be responsiable for all the maintenance and repairs (some very large) of owning my own home. Really just want a place that I can lock the door and leave for 6 months out of each year and never have to worry about or care for. So far renting has been the best solution for my lifestyle as I can rent in one place for 6 months and then just leave when I want to travel the other 6 months. But I do like having a home base - just haven't found one that works for me yet. Probably the best would be a tiny house on a tiny lot and a house sitter/caretaker for when I was gone - or a paying roommate - as I'm not sure I could handle all the potential problems with condo ownership. I personally think that those potential problems outweight the benefits. For now I'll continue renting.
Emphasis mine. My sentiments exactly. I don't want to live in someone else's property (renting), I hate being subject to other people's rules (renting, condo living), and I have zero interest in or skill at maintenance (owning).
Emphasis mine. My sentiments exactly. I don't want to live in someone else's property (renting), I hate being subject to other people's rules (renting, condo living), and I have zero interest in or skill at maintenance (owning).
You're right Jane (aren't you always :-)!). I love looking at small house on small lots right in the heart of a small city. Price is generally the limiting factor though - especially for some of the smaller cities I like (coastal places generally) - that's one reason that condos and townhouses are so attractive as they are usually much lower cost then a house in the city. But I like looking at small houses and you never know what you may find. Fortunately I'm not attached to any one place because of a job or family, so any place is open for me to move too (Europe?). Gives me lots more flexibility when looking for a place. But like Hey Dude mentioned, once you buy a place you are sort of trapped. It takes alot more time and money to sell a place and move when you own compared to renting. If I could find a way to make renting affordable in the long term, then I'd do that in a heartbeat just for the flexibility. Even though, like you, I don't really like the whole landlord thing, I think for someone like me the trade off is probably worth it. Maybe when I'm older and more ready to settle down permanently then buying will look more attractive.
Like this post shows...there are pros and cons to both renting and owning. I suppose everyone has to decide what is best for their lifestyle, goals and so forth. I definitely love home ownership....but when I read posts as to why people prefer renting, I can see the benefits of that as well.
There are other options...what about purchasing a duplex, rent out one side to help with the cost of mortgage...but yes there is a downside of being a landlord unless you find a fabulous tenant! Another more recent trend....home owners sometimes do a kind of housing swap where they agree to live in one another's homes for a period of six month or whatever...which allows people to live in other cities or countries but not pay any rent/hotels...kind of a creative idea.
Like this post shows...there are pros and cons to both renting and owning. I suppose everyone has to decide what is best for their lifestyle, goals and so forth. I definitely love home ownership....but when I read posts as to why people prefer renting, I can see the benefits of that as well.
There are other options...what about purchasing a duplex, rent out one side to help with the cost of mortgage...but yes there is a downside of being a landlord unless you find a fabulous tenant! Another more recent trend....home owners sometimes do a kind of housing swap where they agree to live in one another's homes for a period of six month or whatever...which allows people to live in other cities or countries but not pay any rent/hotels...kind of a creative idea.
I had also thought about the house swapping thing when I owned a home in a resort (snow ski/lake/mountain) town. But, to be honest, the idea of swapping just wasn't very appealing to me. Not sure why but maybe the whole "someone is sleeping in my bed" kind of thing. Weird I know since I don't have too much problem with that when I rent a vacation home or stay in a motel myself. But maybe that's because I'm the renter in those places where as having someone living in my house, with my persoanl stuff is sort of uncomfortable to me. But the idea is great otherwise and probably something that would work well for other (less insane then me :-)!) people.
One idea I looked into was buying a Contel. Which is basicly like a fancy hotel suite in a resort town that you own. It has all the ammenities of a hotel, and is staffed like a hotel, but you own it and they will rent it out for you while you are gone. But I decided against it for the same reasons as I listed above.
The SO and I have a running fantasy about living in a duplex--each of us to a side. It could work.
[QUOTE=Spartana;97851]I had also thought about the house swapping thing when I owned a home in a resort (snow ski/lake/mountain) town. But, to be honest, the idea of swapping just wasn't very appealing to me. Not sure why but maybe the whole "someone is sleeping in my bed" kind of thing.
I understand...that would be something I would have to resolve also...and I've thought about....but if it meant I got to live in a cool city/country for part of the year I could probably get beyond it. However this isn't really even an option for me at this time in my life because of my little herd of pets. :)
The SO and I have a running fantasy about living in a duplex--each of us to a side. It could work.
Oh that's funny! But hey, if that helps to keep the relationship strong then why not!! You're still close in proximity but yet you have your own space.
A condo definitely can work out financially. As can renting. My parents rented the house I grew up in for 22 years. By the time dad retired their landlord had been retired for 6 or 8 years, except for the duplex we lived in. My parents were lucky to be paying about 1/2 market rate by that time because he didn't raise the rent much since my folks did all the basic minor maintenance like painting every few years, keeping the garage doors from collapsing under their own weight, etc. Then they bought a 20 year old condo in a fantastic neighborhood. 17 years later dad sold it for 3 times what they'd paid for it. The real estate boom was definitely over by then but their older neighborhood was still a prized one in their city so he had no trouble selling. Rents for units in their building that were being rented out had only gone up maybe 50% during the same period.
Like others have said, no one can predict the future value of an investment. But you can definitely do stuff to try and help keep the neighborhood you live in nice, whether you are renting or buying. Almost the entire time my folks lived in their condo dad was treasurer of the board. My parents' efforts definitely helped keep the building on track. There was a period where their live-in manager quit and they had trouble finding a decent replacement. Although I'm sure it was a lot of work, mom's efforts at keeping the public areas of the building spotless during that time (both supervising the outside cleaning service and doing a bunch of it herself when they didn't meet her exacting standards) undoubtedly were invaluable to everyone who owned a unit in the building.
And depending on where you live renting may actually make more sense financially. We currently rent a very nice apartment in San Francisco. We pay $2600/month, but I've crunched the numbers and buying a comparable place would cost significantly more every month in mortgage/taxes/association fees, even if we made a 20% down payment. Not to mention that we'd not be able to invest that 20% down payment elsewhere, as we are now. If we planned to live here for 20 years it would probably make sense to buy, since rent will keep going up, but I doubt we'll be here for long enough to make it worth our while.
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