Sharing is the favorite buzzword in today’s economy.
Companies like Uber and airbnb are turning their industries upside down services that offer flexibility, mobility, convenience and are cost-effective.
Is this what’s in store for home ownership as well?
All across the Southland, there’s a bit of condominium renaissance going on. While not exactly new, condos do offer many advantages prized by the next generation of home owners.
First, exactly what is a condo?
A condominium is simply a form of shared home ownership. This means that a number of households occupy their individual units while sharing the common areas, and most importantly, the land upon which the condos are built.
Another similar form of common ownership is the coop. The coop differs in that a condo owner has title to a specific unit, whereas a coop offers shares in the complex in exchange for the right to occupy some part of it.
If this sounds confusing, then the good news is that you don’t have to worry about it much because coops are not common in Los Angeles.
Why buy a condo?
Condos may be cheaper to buy and cheaper to own
The number one reason many buyers look to buy condos is cost.
In our area, the cost of land is roughly 70% of the value of residential property. And since the cost of the land is shared between the owners in a condo, these properties tend to offer much more interior space and value than a similarly priced single family home which takes up much more land per household.
Also, the costs of maintaining the outdoor space, such as water and power is also shared which further reduces expenses.
Condos offer a more efficient lifestyle
The efficient-living lifestyle is one advantage that’s often overlooked, especially among first-time home buyers.
There’s no question that single-family homes offer many intangible benefits. Outdoor space, gardens, pride of ownership and control over your property are all very real and very important considerations.
Truth is, these benefits come at a cost. They cost not only money, but time and energy as well. Many first-time buyers are often surprised by just how much maintenance and upkeep a homes usually need. For gardeners and DIYers, spending your time puttering around the house is another pleasure of home ownership. But for others, it can feel like a part-time job.
It’s a simple fact that buildings wear out. Perhaps slowly, but they do need regular attention. Big ticket items like roofs, windows, parking areas and outdoor space are usually fall under the group management responsibility of a condo, meaning that individuals have less to worry about and more time to enjoy other aspects of their lives.
Did I mention amenities?
High on the list of many condo buyers’ priorities is amenities.
An amenity includes things like swimming pools, gyms, spas, recreation rooms and outdoor entertaining spaces.
True, all these things are available with single-family homes as well, although at significantly higher cost.
Yes, New Yorkers, you’re right. LA is not Manhattan.
But things are changing. And one of the most exciting shifts happening right now in LA is the move toward density. What I mean by that is, more and more development is underway in neighborhoods like Hollywood, which is creating communities where people can live and work in the same place.
Want to be surrounded by nature? Move up to the canyons. Want the world at your doorstep? Then, more than likely, condos will be your place.
Even more promising is ongoing expansion of the Metro train lines which are connecting city centers like Downtown and Hollywood with the rest of LA. As you’ve most certainly heard, it’s now possible to step outside to Hollywood and Vine and be in Santa Monica in less than an hour, all without ever starting your car.
So, take that Brooklynites.
Condos are green
By their very nature, condos are more energy and resource friendly. Clearly, any kind of shared community will use less land than single-family dwellings. Couple the inherent design advantages along with the use of lower energy technologies and sustainable materials often used in new condos, and you’ve got a recipe for green living.
Why condos may not be for you
Besides the obvious fact that condo owners usually don’t have much in the way of private outdoor space, there are other reasons that condos may not be the right option for you.
Lack of control
In exchange for the lower costs and greater efficiencies of condo living, owners must also be prepared to sacrifice some measure of control.
The rules and regulations of condos are set by the owners as decided by the Home Owners Association (HOA). Some HOAs place restrictions on pet ownership, interior remodeling and might even outlaw things such as satellite dishes. Moreover, HOAs commonly set the ground rules for long-term and short-term rentals of condos. So if airbnb is part of your plans, a condo may not be the best choice.
Some financing not available for condos
If you’re planning to make your purchase with less than 20% down payment then you will need to do a little research before making your offer.
The reason is because most mortgages with less than 20% down payment are insured by the Federal Housing Authority (FHA). Under FHA guidelines, both the condo and the building must be certified by the FHA before they will agree to allow the loan. In order to get certified, the HOA must first apply with FHA. A substantial number of LA condos have not been FHA-approved. While it’s certainly possible to certify many of these complexes, in practice a non-approved building will be out of reach for buyers with small down payments.
Condo prices don’t always move in sync with traditional homes
Condos do tend to appreciate along with the rest of the housing market.
However, depending on the market climate, they may not appreciate as much or at the same time as single-family homes.
The reason is that unlike homes (at least in Los Angeles), condos can be built in response to market demand. This is happening right now. Just look at the skyline of many neighborhoods and it sure looks like developers can’t built condos fast enough. If developers build too many, this can lead to temporary oversupply which dampens prices, even if single-family home prices continue to rise.
Following the building boom of the early 2000s, downtown LA experience exactly this scenario. Developers had flooded the market with new condos at the very same time as the housing market crashed. Since then, downtown condos have recovered and the market is stronger than ever. In retrospect, this turned out to be a real opportunity for any buyer willing to wade in but was a very tough time for condo sellers.
The takeaway is that before buying a condo (or any property for that matter), it’s important to consider how long you expect to stay and what your future plans might be. Of course, with real estate as with many other things, time heals a lot of problems.
So there you have it.
The case for and against the condominium.
Ready to jump in?
Next week we’ll take a look at the eight special things you need to consider when purchasing a condo.