When most of us think of buying a home we think of the nice detached house with a picket fence and a nice backyard. Most of us have come across the idea of buying a condo at one point in time. Buying a home or buying a condo will depend on your individual needs and lifestyle. Below are some quick tips that will empower you to make a better decision.
What is a condo?
“Condo” is short for condominium and describes a type of real estate ownership. You are essentially buying an apartment. Both look identical in appearance and you cannot tell an apartment complex from a condominium development simply by looking at them. The differences are legal and reflect a different level of interest in real property. From a technical point of view you are the owner of the airspace within the boundaries of the condo unit only. All other property in the development is considered to be common and an individual condo owner will only have a fractional interest in this.
Advantages of Buying a Condo
The advantage of buying a condo lies in its affordability. This means that a buyer will have to come up with a smaller down payment. This can be enticing to first time home buyers who are short on cash.
Generally condos are easier to maintain because you only have ownership of the apartment space itself. Large items like the roof, gutters, siding, and landscaping will be maintained by the home owners association (HOA). For this reason many retirees buy condos because they can no longer maintain a single family home.
Locations in urban areas
Many high end condo units are being built in the urban areas of cities within walking distance of entertainment, dining, nightlife, and high paying jobs. This is especially attractive to buyers who like fast paced environments but do not own a car.
Generally speaking condos do not appreciate as fast when compared to similar detached homes.
HOA dues and assessments
HOA dues and fees can be very expensive relative to the mortgage payment. They can also “assess” large one time fees to fund new roofs or siding. Keep in mind that HOA’s have the authority to foreclose on your property so paying dues is mandatory.
Rules & restrictive covenants
There are many rules and restrictive covenants regarding condos. It is imperative that you get a copy of all the rules and restrictive covenants from the home owners association and read every word of it!
How does a condo differ from a single family detached house?
With the single family home you are also buying a parcel of land and hence have ownership of a larger amount of real property. With ownership comes more freedom and responsibility. All landscaping, yard work, roof and gutter work is the responsibility of the home owner.
Single family homes will almost always appreciate much faster than condos in similar areas and are thus more economically viable. This allows home owners to create a larger amount of equity and get a larger check at the closing table.
Easier to sell
Detached are in more demand because of their versatility. There is usually more square footage and room for larger closets and amenities. A house with a fenced in yard are attractive to owner with pets or ones with a family. This makes them makes them easier to sell because they appeal to a larger pool of buyers.
Absence of an HOA
The absence of an HOA will give the homeowner greater freedom in designing and modifying their home. Also, money that is not given to an HOA can be used in other areas such as upgrades, or paying down the principle on the loan. Also, having the option to grill out with your friends in the back yard is a nice feature that allows a greater sense of freedom. Keep in mind that many homes in new construction subdivisions will have some form of a home owners association so never assume there is not one in place just because it is a detached home.
Having more distance between yourself and your neighbors affords a great opportunity for quiet enjoyment of your property. Urban environments and having neighbors in close proximity gives rise to nuisances such as hearing load footsteps above you or overhearing a neighbor fight with a spouse etc.
Ultimately you have to decide what’s most important to you. Condos can be great to a retirees who cannot maintain single family homes but do not want to rent. Single family homes are the ideal place to build equity for those in it for the long term.
When people think of investing their money in the market, they first think stocks, bonds and mutual funds. However, what Wall Street doesn’t tell you is there is an alternative asset one can add in order to diversify their portfolio: real estate.
Real estate investing expert Preston Despenas answers a few questions on how investing in real estate be an easy and effective way to diversify your investments, including your retirement savings plan.
Why do you recommend investing in real estate?
Preston Despenas: Real estate is a great investment because it’s a hard, reliable asset unlike stocks, bonds and mutual funds. Real estate investments also have several benefits including mitigating some risk by adding diversity to a portfolio, it can generate monthly income from rents and properties. Real estate investments can also be structured to include leverage in the form of a mortgage, which can make your investment dollars go farther.
You may be wondering about the risks and responsibilities of owning a home and managing tenants, and I will explain the hassle-free landlord options in a bit.
How can real estate be incorporated into a retirement savings plan?
PD: Adding income-producing real estate to a retirement plan is a terrific option. If you are interested in adding real estate to your retirement savings plan, I suggest you first talk with an IRA custodian. When adding real estate to your retirement savings plan, according to IRS rules, the assets need to be held in a self-directed individual retirement account (SD-IRA), which is administered by an IRA custodian.
A custodian or qualified trustee is responsible for administrative services, due diligence and filing the proper IRS reports, among other things. It’s important that the funds are transferred to a self-directed IRA, which will allow you, the account owner, to direct the account trustee or custodian to make a broader range of investments, including real estate.
Another benefit of adding real estate to a self-directed IRA is that it can provide risk diversification to a retirement portfolio. All assets come with degree of risk, such as stocks, bonds, mutual funds and ETFs. Real estate is also an asset, but it has a couple of unique features compared to the other more traditional assets in retirement accounts. First, it is a hard asset – meaning it is an actual building and/or piece of land. Second, sometimes the value stocks, bonds and mutual funds can move in the same direction at the same time. Real estate values are not fully-correlated to the moves of the stock market and sometimes might move in the opposite direction. Combined with rental properties’ ability to also produce a steady stream of income, real estate has the potential to protect your portfolio against inflation.
Lastly, some investors don’t have the available funds outside of their retirement savings to purchase real estate. Using a SD-IRA allows investors to add the income-producing property to their retirement account and it allows them to secure non-recourse financing on the property so they can have a mortgage and not have to pay for the entire property outright.
What are things investors should consider when investing in real estate, especially if they’ve never been a landlord?
PD: Investing in real estate sounds difficult; however, with the right tools and guidance, it can be an easy and successful process. Investment firms with experience working with self-directed IRA options can help make investing in real estate a passive and hands-off addition to your portfolio.
While there are many benefits to going the traditional route of renting real estate properties, renting real estate on your own also means taking on significant amounts of responsibility, both when buying the property and while owning it. Many investors don’t have the time and expertise to assume the duties that come with owning and managing a rental property, and that’s why some real estate investment firms offer a hassle-free approach by providing a management service or tool to help ease the maintenance of the long-term investment.
Real estate investment firms are helping buyers purchase residential properties in distant cities and manage them efficiently. They can help secure on-site property managers to help investors maintain the rental property, manage the tenant relationship and seek new renters when needed. In addition, some offer online management tools to help eliminate the day-to-day headaches of being a landlord.
Additionally, real estate investment firms can provide investors access to properties in a variety of markets. They look for properties that have positive economic indicators, low vacancy rates and prices and have the potential to garner relatively high rents. This allows investors to have access to properties with the best rents, long-term economics, and purchase price entry-points in order to get the best overall return on their investment.
It is important to remember that if you add real estate to a retirement savings plan, in accordance to self-directed IRA rules, the investor is not allowed to live in or visit the rental property, SD-IRA investors need to delegate the needs of the income-producing property through their property manager by working through their trustee or custodian.
What are the advantages to non-recourse financing?
PD: Finally, there are two primary advantages to non-recourse financing when it comes to real estate investing. First, it is the only type of financing allowed with investing in real estate through a self-directed IRA. It allows the investor to leverage their portfolio, so they don’t have to purchase the property outright and stay IRS compliant. In addition, it does not hold the borrower personally liable for defaulting on the loan and the property itself is collateralized asset. This allows for the ideal low risk, high reward investment.
Secondly, non-recourse financing is a great option for foreign nationals to invest in US residential income properties. Like SD-IRAs, it is the property that is the collateral in the loan and the borrower doesn’t need any special approval. Thus, these loans can be much easier to secure for foreign investors that might have to meet higher borrowing standards at US banks.
When I defend Virginia property owners in lawsuits involving the Americans with Disabilities Act (ADA), certain plaintiffs greet me warmly as I walk up to depose them. Why? Because we have seen each other so many times we are now on a first-name basis. One plaintiff in particular has filed around 50 ADA lawsuits in Virginia alone.
To property owners and some judges, serial ADA litigants of this type are profiteers who cynically work with so-called “ADA drive-by attorneys” to target commercial property owners, managers and their tenants for money under the pretext of a worthy crusade. But others see things quite differently. They regard these individuals as whistleblowers of sorts, regardless of the purity or impurity of their motives. “Why not ferret out businesses that fail to comply with civil rights laws?” they ask. “If it were the ’60s, would we criticize someone who sued hotels for turning away African Americans?”
Regardless of where you come down on the issue of ADA lawsuits, the reality is that the commercial property sector simply cannot ignore the risk they represent. Below are three tips with the potential to strengthen your ADA risk-management strategy.
No. 1: Engage in a process that demonstrates good faith.
ADA is not a local building code. It is federal civil rights law, which means commercial property owners must be cognizant of its broad objectives. Take ADA’s so-called “readily achievable standard” provision. Those who own older buildings often believe this provision provides an easy exemption from the requirements of the act. “If it is too expensive to do,” the thinking goes, “then we really don’t have to do it because we’re in an older building.”
In reality, the situation is far more nuanced than that.
If your building includes an old store with narrow aisles, your tenant would be unwise to say to a disabled patron, “Sorry. We cannot serve you. It would be too expensive to widen our aisles.” To be sure, your expert witness might explain the age of the building and note that knocking out aisles would reduce the amount of merchandise for sale. But while that might sound like a compelling argument, the plaintiff’s bar would likely counter with a punchier retort: “What else have you done to make your building accessible to the disabled?” If your answer is “Nothing, actually,” the plaintiff’s lawyer will surely pounce: “You couldn’t ask your tenant to put up a sign explaining that people in wheelchairs could ring a bell for assistance if they needed it? Neither you nor your tenant cared enough to put policies and procedures in place to help people with disabilities, given the architectural constraints of the building?” If the plaintiff can show you never took ADA seriously, watch out.
Remember, when it comes to ADA, process counts. Did you go through a process in which you sincerely tried to comply with the act, given your constraints? Do not just assume an architectural change or equipment purchase will be too expensive. Do the research and document what you learn. If the accommodation is not readily achievable, work with counsel to see what else you can do to engage in a good-faith process. Be able to show your clear intent to maximize ADA compliance.
No. 2: Pay attention to ‘curb appeal.’
It is simply impossible for serial ADA litigants to visit and inspect all of the millions of commercial properties in the United States. But what can make your business a likelier target is lack of “curb appeal” with respect to ADA compliance. Imagine an ADA plaintiff’s attorney cruising down a busy thoroughfare on the prowl for possible violators. What perception is your building creating? Is the parking lot full of cracks, with faded lines and weedy curbs? Is the sign over that handicapped space dented, rusted and hanging at a 45-degree angle? Is your wheelchair ramp rotting or in need of a new paint job? These are the types of visual cues that send a message to aggressive plaintiffs’ attorneys. They know that inattention on the outside means a greater possibility of ADA violations on the inside. By contrast, a spiffy appearance could potentially send the message that this property owner is savvy about ADA. The drive-by attorney might just drive on by.
No. 3: Stay abreast of changing regulations.
The ADA was originally passed in 1990, but rather than a static law, it is an ever-evolving set of regulations and guidelines. Commercial property owners need to stay abreast of ADA requirements as they evolve. For example, recent changes deal with everything from the height of x-ray exam tables, to the condition of lifts for the disabled at swimming pools accessible to the public. More broadly, regulators are intent, not just on providing access, but also on actively promoting it. It is one thing to keep a swimming pool lift in storage and haul it out with much fanfare whenever a person needs it. It is another to have a fixed, fully functional lift at the ready—one that does not require the assistance of a team of lifeguards for it to actually be used.
And indeed, fixed lifts are one of the new ADA requirements. Regulators want people to be able to use lifts for both ingress and egress, by themselves. Another huge growth area for ADA—and one that is quite relevant for commercial building owners, managers and real estate agents—is the need to make sure their websites are accessible to the disabled. Can a user turn off that seizure-inducing strobe effect? Does your video have a closed-captioning option? Moving forward, building owners will need to work with counsel to stay abreast of changing ADA regulations, not just in the brick-and-mortar world, but also in cyberspace.
Change comes slowly to the real estate industry. It’s a protected and entrenched industry that doesn’t always embrace change and has established barriers to entry, which sometimes makes it difficult for new ideas and solutions.
Despite the challenges, the rise of mobile users and the sophistication of applications are knocking down the barriers and providing buyers, sellers, and agents with new tools that help them to buy, sell, and design homes. These solutions are changing real estate to be more efficient and engaging, which makes sense given real estate is likely the biggest purchase someone will ever make. Let’s dive into some of the more innovative apps and software platforms.
RentalRoost is a rental search firm that is using Big Data to aid in the search process. This is a significant trend within real estate, the taking of mounds of data and then finding the best way to deliver results from that data in a meaningful way. RentalRoost helps people to determine “how” they want to live, not just “where” by providing personalized rental recommendations. It compares data to user preferences about an area’s walkability, nearby school ratings, and other metrics. Smart Big Data usage is good for real estate because it opens people to the possibility of living in less known areas that offer good amenities and value.
Trulia is a popular site and app that provides users with hi-res photos and neighborhood maps so they can easily see the surrounding attractions. It also includes a sophisticated calculator that helps people see the benefits of renting vs. buying in a particular area.
Zillow is similar to Trulia as it provides detailed data about houses, including an estimate of current value, and graphs showing the value trends over time. Zillow is also a quality resource for “For Sale by Owner” individuals who are bypassing the MLS. It also provides data on recently sold homes, so agents and owners can best assess the current market sentiments and pricing.
Creating floor plans of the interior of a home used to be a costly process conducted by architects. MagicPlan is a new app that allows anyone to create accurate floor plans simply by taking pictures of a room. The app analyzes those pictures and creates a room floor plan in seconds. Users can simply drag and drop to pull each room together to complete a whole-house plan. Floor plans allow potential buyers to better gauge a home’s size, and gives realtors a great selling tool to complement photos.
Another service for the design-minded is Houzz, a site and app that gives users access to millions of photos and design ideas for their home. It connects decorators, homeowners, design firms and builders together so homes can be designed from start to finish. It allows homeowners to present their visions directly to builders and designers, helping to save time and frustration on both ends of the equation.
On the business side of real estate is DocUSign, a leading electronic signature platform that operates seamlessly on desktop and mobile environments. It is quickly becoming a standard for document signing, eliminating the need for agents and buyers to meet in person to conduct simple transactions. It can also be used by brokerages for internal documentation. Documents signed through DocUSign are stored in secure cloud environments so they are always accessible, an important point for any legal disputes.
Another service for brokers is Reesio, a CRM, workflow and document management solution. It enables people to easily create a coordinated brokerage, linking together multiple agents’ transactions and activities. It allows managers to audit everything their agents are doing, so they can ensure documents meet compliance standards, review tasks, and check transactions to be sure nothing was missed.
Redfin is a national search portal that aggregates data across the country. It’s especially useful for individuals who are considering a move to several different locales as it provides them with one source of information and detailed pricing. Redfin is an updated version of Realtor.com, a platform that certainly isn’t new and does not offer bold design, but must be mentioned due to its massive reach and inventory.
What’s next for real estate apps and platforms? There will likely be consolidation among some of the smaller services, with partnerships arising where the capabilities of multiple offerings makes sense. Information and transactions will be stored, managed, and accessed through the cloud, so services will continue to offer instant access. People will also increasingly rely on mobile communications