Condominium is a Style of Ownership, Not a Style of Unit.

Like the headline says, condominium is a style of ownership and not a style of unit. Most people when they hear condo, they think apartment of some sort, that's thinking style of unit.

It is possible to have a 20 units, each unit sitting inside a 1 acre fenced yard, each unit being a 2 story house with a full basement and still be a condominium. It has to do with the way the land is owned.

The rights to each unit is individually owned, but the land is owned by the condominium. The condominium is owned by the owners of the units, each condo having a proportional share. The condominium is usually known as the HOA (home owners association) In most condos, the individual owns somewhere from the middle of the wall in, or sometimes the drywall in... The HOA typically owns all the common area, including the exterior of the buildings, sometimes in between the walls, if it has enclosed hallways, they would be owned by the HOA. There is no set rule.

When buying a condo, the best way to view a condo is to think of it as corporation that has share holders, a board of directors, corporate by laws and articles of incorporation. It's safe to say that most condos are exactly like that.

After it is determined that a buyer likes a unit. Now you have to decide if you want to buy stock in this company. Is this a good stock to buy? Well, to determine that, we have to look at the books, the income and expenses, and the factors that determine them.

How many owners vs renters are there, owner occupied vs investors. This is important whether you're buying as an owner occupant (we'll call them the occs) or an investor. Essentially it will tell you who is in control of the company, the occs or investors, they have different motivations. Occs want a nice place to live, they're willing to spend a little more money to maintain a certain lifestyle, while the investors care about a rate of return.

Now the finances. Do they have debt? Are there major capital improvements on the horizon? Do they have the reserves for improvements.

Income, how much is the monthly assessment? Are there currently any special assessments or coming soon?

When looking at the income you'll want to know, are there owners that are in default on their mortgage, how many foreclosures and short sales were there in the last 5 years? This is important for a couple of reasons, if there currently are a significant number of foreclosures and pre-foreclosures then, the values could be dropping, also it could have a major impact on the income.

Back to special assessments. What are they? They are the cost of major projects that are in an addition to maintenance. Some of the common major projects are, Roofs, Siding, Parking areas (concrete, or asphalt and striping), Pools, Sprinklers.

Monthly assessments cover monthly maintenance and other ongoing cost. A good example of monthly maintenance is lawns, snow removal. Then there is utilities, water sewer and trash are very common. The main reason water is part of an HOA is simple. First, I'll ask you a question. If you do not pay the electric bill, what happens? They shut off the electric and the debt follows the account holder. If you don't pay your water bill, what happens? They municipality puts a lien on the land, which means they just put a lien on all the owners.

If you have any questions feel free to reach out to me 801-999-8209 or [email protected]