Three Condo-Buying Considerations You Shouldn’t Overlook
Take a break from scrolling through condo listings online and read this.
When condo-hunting around downtown Chicago, finding beautiful homes in all sizes and price ranges is relatively easy.
From the South Loop to the Gold Coast and over to the West Loop, the locations are no-brainers — close to many of the cultural, entertainment, and lifestyle attractions the city has to offer. But choosing the right condominium building to call home (among dozens of choices) can be somewhat daunting. Pet policies are just the tip of the iceberg…
Many potential condo-owner often fail to fully consider certain factors. Save yourself some time (and headache) by considering these…
#1 — Unit Count
How many neighbors would you like to have? Condo living in and of itself is community living, so this is a tough question for many. But if you’re searching for a loft or condo in or around the Chicago skyline, consider exactly how the number of your fellow condo owners (or renters…read Rental Policies below) will impact your desired living experience.
Which is a better fit: the tight-knit 23-unit loft building with neighbors you’ll have over for dinner or a 900-unit metropolis where you’re better able to come and go as you please in relative obscurity yet enjoy a TON of conveniences under one roof? In some cases, total unit count is less important than how many neighbors share a floor. If privacy is a particular concern for you, fewer floor mates is often preferable.
Aside from those preferences, building size also often plays a significant role in determining the size of the each condo-owner’s property tax bill. Think about it, the amount taxed on a parcel of land in River North, for example, split 400 ways will result in smaller individual tax bills for its owners than a similar one split 100 ways.
Maintenance and operating costs work similarly. Consider the expenses involved in operating a high-rise: 24/7 door staff, engineers to keep water pumps and climate-control systems running smoothly, cleaning staff to vacuum common area floors and wipe down gym equipment all represent some fixed expenses. This is why 50-unit buildings often don’t have pools — too few units among which to split the high maintenance costs.
#2 — Owner-Occupancy Percentage
Now let’s talk about investors. First, a little history. During the most recent market downturn, many condo buildings saw a significant uptick in sales to people who lease units purchased for investment income. These condo landlords are a huge reason prices didn’t fall further in buildings where home-buyer demand temporarily dried up while foreclosures and short sales ran rampant.
With that said, profit-minded investors and home-owners often have different expectations and interests when it comes to voting on projects that require spending. Owners are generally long-term focused and better able to stomach increases to monthly assessments if they improve overall financial health or improve amenities while landlords (who often live elsewhere) generally prefer keeping expenses as low as possible.
According to some building managers, a high percentage of renters leads to higher maintenance expenses from more frequent move-ins and move-outs (those dings to corridor walls and door frames require frequent paint touch-ups) and less-than-conscientious consumption of shared resources (think: long showers). And all owners have to pay a pre-determined share of these costs.
Mortgage financing options are also impacted by owner-occupancy percentage. When it falls below 50%, FHA generally won’t allow new loans insured by them to be made on units in the building. If units fall within an FHA-friendly price range (the loan limit for Chicago is $417,000), this effectively locks out lower-down payment buyers who might otherwise want to buy there — making units tougher to sell in some cases.
#3 — Rental Policies
You’re not an investor, though, so why care about rental policies?
Well, let’s talk about your exit strategy. When you’re ready to move on due to changes in family size, job location or a change in preferences, what options will you have? Many condo owners find themselves wanting the flexibility to rent, especially if the market is not great at the moment they need to move.
How easy that is to do depends on how rental restrictions are structured. Are rentals allowed at all? Are they subject to a limit (a.k.a. a rental cap)? Does the association have plans to institute a cap that will cause landlord owners to sell en masse? These are things to think about unless you consider your next home your forever home.
I’ll let you get back to your online listings search now, hopefully with a bit more to think about.
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