Buyers ask me all the time about whether they should buy a condo or house in Austin, TX. Here is the process that I take them through to help them with this decision.
What is your risk tolerance?
Buying a home that is a good investment should be a priority (this is not just a place to live, this is usually an individual's top performing asset).
Historically, when the market has a downturn and home prices fall, I've seen condos suffer a larger decrease in value than a single-family home in Austin for the most part. Yet, when the market is on the rise, condos generally enjoy more of an increase in value. In other words, if you buy a condo, you may be taking a ride on a roller coaster as far as value is concerned depending on the market.
In the last recession (remember 2008?), many single-family homes only suffered 10-15% in value and many of the homes still increased in value during the recession. Of course, real estate is a proven long-term wealth building tool and you should be fine if you own the property long enough (especially with Austin's appreciation trends). Yet, if you were forced to sell in a down market, you might suffer more value with a condo.
Need a loan? Even Banks think Condos are Riskier.
It's also important to note that many condos are notoriously difficult to finance, especially in a down market when banks have tightened controls on lending. Many banks will not finance a condo without a buyer putting 10% - 20% down. You may have the money to do this, yet when you sell the property, not all buyers fall into this category. And buying a property that has a pool of limited buyers in which you will appeal is not a smart move.
Have you ever seen an "I Heart My HOA" Bumper Sticker?
Home Owner Associations (AKA HOA) can make or break living the joy of living in a condo community. I've never heard anyone speak fondly of their HOA. Get to know the word assessment well. HOA's have a lot of power and depending on the issue and bylaws, can vote to have each owner pay a hefty assessment. I've seen them be as high as $8,000 when new roofs, decking and painting are needed. This assessment will be on top of what you pay monthly. And I usually see HOA fees range in price from $150 - $400.
Speaking of A Long-term Wealth Building Strategy...
When I consult my clients during a listing presentation, I always make it a point to ask if they have considered keeping their current home as a rental property (yes, I talk my clients into not hiring me, I AM that good:)
Real Estate is a proven long-term wealth strategy (check out and read HOLD from KellerINK). This is why, when you are buying a property, condo or home, it's important to research whether or not you will be able to lease the property in the future. Talk with the HOA on this issue. Many condo HOA's, depending on the community size, will have a wait list of properties waiting for approval to be able to lease.I have not found this to be as much a problem with single-family homes as I have seen with condos.
In conclusion, Don't Get Conned by a Condo.
In conclusion, you may look at my notes and think I am against buyers purchasing condos. That is not the case. As long as my buyers are comfortable with all the statements above, then I am all for it. And, of course, every situation is different and every buyer has to weigh the pros and cons of their decision. Not all condos are created equal and some condos are going to be a better purchase than others (we even have condos in our market that look like single-family homes, that may be the right product for you?). Having a good agent with experience to help you make this decision is a good move!
I would love to help you make a great decision in your next home purchase. Please call me today or check out my blog with Interview Questions for Buyers Agents (and my answers), Tips on Choosing the Right Listing Agent or Tips to Selling Your Home On Your Own - FSBO Style.
Laura Ivy Blessing blogs about the Austin, TX known and lesser known happenings with a splash of real estate savvy for today's buyers and sellers. Please call her today to consult and advise you through your next real estate transaction. Blessing@KW.com