Tag Archives: condo ownership

INVESTMENTS – BAD and GOOD

Posted on by

BAD INVESTMENT

As said before, one of the worst investments is condominium ownership, more to the point – purchasing a unit in an older condo building or one that is badly built, or worse – not situated in a good location.

Why ? Depreciation. Buildings always over time depreciate in value, while land appreciates. [Not always, but hopefully so]. The older a condo building gets, the more its needs repairs, maintenance costs are increasing, and eventually large projects need to be done to the building. Most financial operations – unless massive increases in owners’ fees are practiced – do not have sufficient funds to pay for large construction projects. That’s where SPECIAL LEVIES come in. The money collected cannot appreciate in those accounts. Especially now, with interest rates being so low. In addition, more condo corporations than not are likely to mishandle funds (using money for projects that are not necessary, while others are neglected.)

In summary: Unless an investment into a condominium is purely based on speculation (quick buy, quick sell in a hot market), owning and living at length in a condo can become costly.

GOOD INVESTMENT

Whether an investment turns out good or bad is purely dependent on the current economy, situation, location. [Of course, one can always ‘wait it out’ – “don’t wait too long and pass away over it, though”.]. Almost seems, that good investments – now and for a long while into the future – are DONATIONS, DONATIONS – mostly online.

I thought, I saw it all, but there is daily some other scheme popping up of how to sift money from unsuspecting media users. What we call : “auf die Tränendrüsen drücken” – meaning: During bad times, getting worse by the minute, develop a website – or use a tech to write one up for you or buy one ready made – and invent some event that could make users cry hot tears – and collect money through your website. NOW IS THE TIME, Folks !

Advertisement

Condominium Ownership – (revisited)

Posted on by

It always amazes me how few property owners (either already owning a condo or contemplating buying into one, exchanging their home) know the consequences of being a condo unit holder. A condo is not just an apartment, far from it, or a living space, in fact condo ownership is equivalent to any share ownership in any corporation. A condo corporation is the overriding corporate entity responsible for jointly owning, managing and controlling a condominium building, whereby each owner has the right to vote (usually during an annually occuring General Meeting) jointly with all co-owners. As it is impossible and not practical that all owners in a condo building also manage the day to day operation, there will usually be a property management company – who are non-owners – responsible for this, paid for by all condo owners. Mostly – also for practical purposes – represented by a Council, all of whom should be owners.
In other words, condo owners cannot easily control what changes or improvements they may want to make to their units, nor can they control (except by special vote) what expenses are required for the building and grounds. If expenditures are mismanaged, it can blow a big hole into the (jointly owned) contingency fund.
The only advice I can give to prospective purchasers of a condo: look closely at who manages a condo building, even more closely check out the finances, how much is the remaining contingency fund.
It is well known that buildings depreciate at an alarming rate, the only appreciation comes from the land base and/or is market driven. And older buildings in the absence of sufficient funds require regular special levies over and above the monthly condo fees. In the long run this can cost a unit holder a fortune.
Alternatives to condo ownership are: Either remain in your house and stay in control. Or, sell out and rent, use the money for paying a portion of the rental costs. This way, you can travel whenever you want.

Condominium ownership versus Rental

Posted on by

Considerations on living options in the light of high real estate ownership. When faced with fixed income and no cash flow to speak of, nor any amassed riches. There are options to ownership: From my own experience, condominium ownership is the worst of those. Not only is an owner (in such a commercial entity) responsible for maintaining their own unit (inside walls, flooring, ceiling, doors, windows, appliances, fixed furniture, plumbing and electrical repairs), but as owner is also responsible for paying large amounts to maintain a more or less big building in which an owners’ unit is housed. The larger the building, the more expensive the repairs to the building (that is the common or shared portions of any unit holder, such as hallways, walls, outside walls, grounds, underground services and all electrical, plumbing and mechanical systems).

Throw in for measure an outside contracted property management company (who may, or may not be corrupt). And some sort of ‘consortium’ that actually runs that building. As an owner in such a condo corporation, there is no control of what is being done with a unit holders’ money. And that money must be paid as a monthly fee. Comes a big repair, an extra levy is raised.

RENTING comes to mind: The money spent on that monthly fee and on extra levied fees can be saved towards monthly rental cost. So can property taxes. On an average I would say depending on the age of building and location a monthly condo fee can amount to a minimum of $400. Rental costs in even expensive areas can vary from monthly $1,000 to over $2,000. Lets say, I can afford $1,200 a month. Deduct $500 (condo ownership and property tax), leaves me with $700. In my case I have spent $35,000 in five years for repairs to my condo and improvements. In the best case, I add an extra cost of monthly $200 for regular maintenance of my condo, that would leave me with a balance for monthly rent of only $500. Home insurance is the same for both options.

But no more nightmare, no worries, no hard construction work. Answer is clear: RENT ! Go travel, and use your money.

CONDOMINIUM OWNERSHIP cont’d.

Posted on by

Continuation of my discussion on Condo Ownership. It always amazes me that so few owners of this type of real estate understand the consequences of owning it. And that so few of real estate agents who are selling potential buyers into this kind of property explain the implications of owning a condominium. [Living in British Columbia, this type of residence or home is referred to as “strata” [ A strata usually is a geological entity. http://en.wikipedia.org/wiki/Stratum ]

Then why do realtors sell this type of property as a “suite” instead of referring to it as a unit in a shared building (shared by more than at least two owners who are responsible for the maintenance, upkeep, financial assets, insurance and other sundries) which – the bigger the building and the older it gets – could amount to millions of dollars for repairs and maintenance to the entire building structure. Hence “an albatross around my neck” expression.

What makes it much worse is the loss of control each unit holder has on the operation of such a building, worse the larger it is. And those who are running the day to day whatever is needed, or even worse, an external management company, otherwise also referred to as “mismanagement company”. It is common human nature that people enjoy controlling others. Unfortunately those are mostly the ones who are incompetent or know the least of construction, finance control. In several condo’s I owned I didn’t have a big problem. But once in a while one is hung up in a situation that becomes the background for a NIGHTMARE CONDO story. Especially if one sees one’s investment going down the drain – literally in a ‘waterfall of busted pipes and other regularly occurring floodings’.

Having lived so many years in Alberta, Canada, in my own homes, on my own land, not sharing any common property, or other buildings hanging around my neck and making my life more miserable, trying to get out is not an option anymore, but has become a necessity.

 

NIGHTMARE CONDO

Posted on by

Continuation of my discussion on Condo Ownership. It can go very well or it can backfire. Costing the unsuspecting buyers their life savings. It is totally understandable that many who buy a home/property that is classified as a condominium may not fully comprehend what they are buying into. Primarily, unlike buying one’s own home on one’s own lot or land, with a condominium one buys (a) a commonly shared building, and (b) commonly shared land. The smaller the building, the easier it is to manage, in terms of repairs, regular maintenance and operation (heating, water, sewer, other municipal expenses). Operation also includes managing contracts for gardening, cleaning the building and grounds, and garbage removal etc. All these costs are shared by a number of owners who have purchased a share and reside in their own (four walls so to say) suite, for which they are responsible, and which they may improve or renovate, or repair. All owners also pay regular monthly fees for any of those expenses that affect the common shared portion. More often than not, there exist property management companies who under contract with all owners have the responsibility to manage the building and grounds, finances and insurances and sub-contracts for repairs, maintenance and operation. One of the major components of a good financing plan is (a) receiving sufficient monthly fees from the owners to build up a good solid contingency fund for future bigger expenses; (b) to be accountable to all owners and provide regular financial statements including audits by an independent auditing company;  (c) manage a larger building responsibly, with transparency and allowing for regular information disclosure. Else, the situation arises of the NIGHTMARE CONDO. Because not only does the management of a condo corporation involve one property manager, but also a whole committee or group of people – themselves owners – who regularly meet and take decisions. Which is commendable, being volunteer positions, but can backfire when certain elements of  “being on a power trip” play into this. From the four condo homes I have owned and never had any problems, until now, a slight warning: When buying a condo, look carefully at all condo documents (‘subject to purchase’), check the contingency fund (how much money is available for future larger expenses). With older buildings, after 30 or 40 years, one could assume that there should be a healthy fund. If monthly fees were not raised for years, then there is not enough money. Also new now as a rule is the Depreciation Report which is a fairly large document showing what systems or parts of the property need larger expenses within which time frame. If future expenses – let’s say 30 years forward – exceed the assessed value of the building, a purchase of any unit in that building would not be advisable. A good rule of thumb is: Buildings depreciate when they age, while land appreciates. All in the context of rising or falling property markets, of course.

Example of 2013 flood damages caused=video