A few years ago, Ralph McLaughlin and his architect wife were shopping when they spotted an appealing condo and -- on a whim -- toured a model unit. Soon, the couple and their two Belgian terriers moved in.
“It’s like an urban village with 10 restaurants and (a) handy Target store,” he says.
As the chief economist for Trulia, which tracks real estate markets throughout the country, McLaughlin always advises homebuyers to take a systematic approach to the selection of a property. But he acknowledges his own choice was more emotional.
“We weren’t seriously looking when we happened upon this condo. But it’s working well for us and has gained 10 percent in value each year we’ve been there,” he says.
McLaughlin and his wife intend to remain in the unit they purchased for many years. That’s one key to a wise property investment.
“Most people’s wealth in real estate is based on staying in the property for at least six to eight years,” he says.
John Rygiol, a real estate broker affiliated with the National Association of Exclusive Buyer Agents (naeba.org), says it’s especially crucial for condo buyers to shop carefully, as appreciation for condos is unpredictable.
“People who buy the wrong condo can find selling tough. That’s because market demand for condos is less than for detached houses,” Rygiol says.
Statistics can tell you a lot about the desirability of a condo building. But your emotional response to a building is also telling, says Fred Meyer, a real estate appraiser and broker who’s sold homes since 1963.
“Make sure you really love the condo with both heart and soul. If you love it wholeheartedly, chances are better others will love it, too,” Meyer says.
Here are a few pointers for those planning a condo purchase:
-- Search for an area with a healthy employment base.
The vitality of a local real estate market is tied closely to the employment strength of the area. But, as Meyer says, the buyers of condos shouldn’t count on a single employer to keep the local economy afloat.
How can you investigate the strength of the local economy?
“Go to the offices of the Chamber of Commerce and ask what’s happening to jobs in the area,” Meyer says.
-- Review data to validate your hunches about the right condo building.
“Look at the resale history for the building going back as long as four years. Notice especially the median number of days it takes to sell units in the building. The more days it takes to go from list to sell, the less liquid the building,” Meyer says.
Also, he says you should be sure to check the “reserves” of the building -- which translates to the amount of money owners have set aside for key repairs and renovations.
“A poorly financed building can become rundown, making it less desirable for future owners,” Meyer says.
-- Avoid a building with unusually low condo fees.
Nearly all condo buildings impose “condo fees” on their residents. Among other expenses, these monthly charges cover the cost of routine upkeep on a building and its grounds, along with support services, like a concierge at the front entrance.
Rygiol says would-be condo buyers sometimes shop for a building with the lowest possible monthly fees to contain expenses. But seeking out a building with rock-bottom fees could be a mistake.
“In my experience, you get what you pay for in condo fees. A building with very low fees might actually decline in value, due to poor maintenance,” he says.
-- Don’t select a building with a large portion of renters.
Homebuyer advocates are wary of buildings in which a large percentage of the units have been rented out by their owners.
“Owner occupants feel a natural pressure to ensure that a building is adequately maintained. Renters don’t feel that pressure,” Meyer says.
What percentage of owner-occupants is sufficient? In most cases, Meyer says you’ll want to see more than half the units occupied by owners. However, this rule may not hold in a resort community where seasonal rentals are the norm.
Though it’s wise to avoid a building with a large number of renters, Meyer says it’s also smart to avoid one that prohibits owners from renting out their units.
“That’s a huge right to give up -- to be forbidden to rent out your apartment if you want or need to do so down the line,” Meyer says.
-- Choose your condo unit wisely.
Even in the ideal building, not all apartments are created equal. Some will be more saleable when it comes time to put your property on the market.
Meyer says it’s usually unwise to buy one of the most expensive condos in a building unless statistics show such apartments have sold readily and for respectable prices.
“It’s usually smarter to buy one of the less expensive units in a building that also has high-end units. Then, over time, the high-end units will help hoist your property values,” he says.
(To contact Ellen James Martin, email her at firstname.lastname@example.org.)