Condos are an appealing way to own a residence if the cost of a single-family home is out of reach, or for those who want to do less home maintenance. Unlike most single-family homes, condos offer a lifestyle that is free of yard work and exterior maintenance and repairs. If you're in the market to buy a home and are looking for increased living conveniences, less space to take care of, fewer maintenance requirements, or perhaps a typical single-unit home isn't in your price range, then you may want to consider a condominium. Here’s a primer for those who want to know more about condominiums in general.

What is Condominium Ownership?

Technically, "Condominium" is a form of ownership, not a style of dwelling. A condominium building is like an apartment building with multiple units that may be stacked or flats. Condominium ownership combines full ownership of the space inside the interior walls of your unit with a percentage common ownership interest in the common elements of the community, such as the land, lobby, hallways, swimming pool, fitness, parking and other shared amenities. As a condominium owner, you pay property taxes on your individual unit, just like a single-family home. When you invest in a condo, you invest not only in the unit you’re purchasing, but indirectly in the units of others and in the common areas as well. You invest in the philosophy that collectively, all unit owners will help run your building and maintain a satisfactory or even exemplary standard of quality for the benefit of all owners. Condominiums are governed by a condominium board of directors (voted by residents) in accordance with bylaws and covenants, conditions and restrictions. A condominium association manages and maintains the common areas and dues can also pay for some or all utility bills, trash removal, window-cleaning, and whatever else the association members (condo residents) agree upon.

What are Town homes?

Town home properties usually are a series of single or multi-story units attached by common walls and may have little or no front & back yard (although many do have yard space), Townhouse owners hold title to their units and the land beneath them, so townhouse units cannot be stacked on top of each other. As with condos, common areas are owned jointly by all townhouse owners. Townhouse owners pay property taxes on their individual units just like a condo. And like condos, an association manages the townhouse community and collects fees from all owners in order to maintain common elements.

What is a Loft?

Lofts are a style of condominium that originated when warehouses in many Eastern U.S. cities were converted into apartments and condominiums. Loft characteristics include: an elevated bedroom space, sometimes accessed by stairs, very high ceilings (commonly over 12-foot tall), exposed pipes and ducts in the ceiling, very open floor plans, sometimes with no walls, huge windows, sometimes stretching floor to ceiling, hard wall, ceiling and floor surfaces such as exposed brick, stained cement floors, concrete, metal stairs and handrails, stainless steel kitchen appliances, and modern/contemporary furnishings. Suiting lovers of modern and minimalist designs that can be crafted to match individualistic lifestyles, lofts offer freedom of wide open spaces typically not found in traditional apartments or condos.

There are different loft styles:

  • Bi-Level/New York-Style/Artist Lofts These units have lofted bedrooms and no interior walls. The have very high ceilings (14+ ft).
  • Industrial Lofts - The most common form of loft today, usually converted warehouses and sometimes entirely new buildings, with high exposed ceilings, no interior walls, expansive windows and no lofted bedrooms.
  • Loft-Type Units - These are the next generation multi-family housing units inspired by the loft, though with interior walls/enclosed bedrooms. They have high exposed ceilings (usually at least 10 ft), large windows and open floor plans.

Why Buy a Condominium or Town home?

Condos are an appealing way to own a residence if the cost of a single-family home is out of reach. Unlike most single-family homes, condos offer a lifestyle that is free of yard work and exterior maintenance and repairs. Many condominium communities also offer amenities such as party and exercise rooms, swimming pools and rooftop terraces that you might otherwise be unable to afford if you purchased a single-family home.

About Condo Insurance

The condo association has a master insurance policy that covers the outside of the building's structure, including the roof and common areas such as pools and sidewalks. The association’s master policy does not insure the inside of your unit or any of your personal belongings. You will need condo owners insurance to cover things like additions, alterations, wall fixtures, floor and ceiling of your unit, personal belongings and personal liability (pays for damage or injury you accidentally cause to others for which you are legally responsible for paying). Your policy will include coverage that is Actual Cash Value (property is covered for the depreciated amount, based on the actual value at the time of loss) or Replacement Cost (the contents of your condo are covered up to the amount that it would cost to replace your belongings with items of like kind and quality).

About Condo Documents

There are several documents involved in condominium ownership that you may want to review before purchase. These papers should be available from the condo's board of directors or their representative. They include:

  • Master deed: The key document in a condo project, the master deed establishes the project as a condominium project. It gives residents the authority to form an operating association and gives the legal descriptions of all individual units and common areas.
  • Bylaws: The operating rules for the condo association. Among other things, they authorize a budget to be created, the assessment of fees, the hiring of professional management staff and other operating duties.
  • House rules: Govern what owners can do in common areas.
  • Covenants, conditions and restrictions: Private restrictions on the use of project property; usually created by the developer.

About Condo Fees and Reserve Fund 

Condo fees, also know as maintenance, or HOA (home owner association) fees are paid by every resident to help with the maintenance of the building, pay the salaries of groundskeepers and maintenance personnel, and provide common area facilities such as a lobby, pool, fitness area or rooftop deck. Condo fees are paid monthly and are subject to change. Typical condo fees include the master insurance policy, water and sewer, trash collection, management fees, exterior maintenance and landscaping, pest control of the common areas and exterior and contributions to a reserve fund, which is part of the condo fee set aside for major repairs and replacement of the association's common elements and assets in the future. Some Condo fees also include some or all utilities and parking.

Each condo owner has an undivided interest in the common elements of the condominium. This ownership interest is often referred to as a “unit factor”. The unit factor for any particular unit will generally be calculated in proportion to the value that the unit has in relation to the total value of all of the units in the condominium corporation. The unit factor will tell you what your ownership percentage is in the common elements and will be used in calculating the monthly fees that you must pay towards their upkeep and renewal.

Each condominium association is required to set aside a portion of the condo fees for a reserve fund to pay for major repairs and ensures that the condominium common elements will be maintained in good shape. Responsible condominium associations will maintain sufficient reserve funds so that increases in condominium fees or the levying special assessments are not needed to pay for future repairs.

About Leasing Your Condo After Purchase, Investment Purchases

Each condo association is different when it comes to renting or leasing your condo instead of occupying it after purchase. Some associations place a limit on the percentage of the units that can be rented out at one time. There may be restrictions on short term rental - only 1 year or longer leases may be required. There may also be a restriction on the number of units owned by any one owner in a condominium property. Therefore, read the condo documents before purchasing to be sure. An owner who leases his or her unit must give the association or management company the name of his or her tenant(s) and a summary of the lease or a copy of the lease. The owner and the tenant are both responsible to the corporation. The tenant is bound by all the same documents as the owners.

Things to Beware of Before Purchase

Take the time to check out the complex before you buy and look out for these red flags:

  • If more than half or so of the units are rentals, think twice about the project. Upkeep may be poor and some lenders will not make a loan on a unit in the complex, which could reduce the long-term value of your investment.
  • If the condo association doesn't have a healthy reserve fund, beware. If there isn't money to fix major items such as a new roof or plumbing, the members will be hit with a special assessment to pay the tab.
  • Avoid a condo association in which the board of directors isn't getting along. They will make poor decisions for everyone else in spite of one another.
  • Steer clear of a condo project that is heavily involved in litigation. Lawsuits with builders and other homeowners can put a cloud over the project.
  • Try to talk to some owners already living at the complex--you'd be surprised at the things people will