Condominium Ownership – (revisited)

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.

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CONDOMINIUM OWNERSHIP cont’d.

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.

 

CONDO NIGHTMARE

That’s all I see when I Google for “condo nightmares” – thousands upon thousands of horror stories. Of course,  owning a condo means living or residing in the same building as many others sharing the building.  Worst situation is owning on the main floor, because water flows down, never up. That would be nice. In four years twice flooding, once from above me, now from below spraying up via a broken water pipe. Get out of here ! s.a.  https://renataveritasopinion.wordpress.com/2013/07/19/nightmare-condo/

NIGHTMARE CONDO

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

CONDOMINIUM OWNERSHIP

(continued)

In all those years I am in Canada I have bought, owned and re-sold my homes. After the very first one duplex that we rented, me and my little son. But not for long. In Alberta, homes with land. Not in all those years have I made any profits on it. Typically, buildings depreciate, while land appreciates. But all depends on location and demand. More than often locations where infrastructure is being developed will appreciate faster. Unluckily, I had sold land before the great boom in land prices and before an area near that piece of land would be revitalized. Condo’s or Condominiums – share ownerships in a condo corporation – whereby shareholders own a portion of the building, the grounds and have their own little suite where they can live and renovate, improve, or more likely maintain and repair. Advice is only given here based on my own experienced. The market is not only dependent on supply and demand, but also on fluctuations in the overall financial markets. One of the real frustrating concepts in condo ownership is twofold: (a) loss of control over one’s investment; (b) cost sharing.

[referred to as: “mitgefangen, mitgehangen” – meaning, if a large repair is needed for a condo building, then all owners must share the cost]. For larger and especially older buildings this can become very costly. Moreover, if a property management company had been in control for years and either mismanaged funds or neglected the upkeep of the building, or both. Example: Of the four condominiums I had owned and re-sold three of them meanwhile, the last I still live in has been a disaster. My out of pocket cost I paid for my share has been let’s say $240,000 in an area where most condo’s go for much more usually. The last assessed value is pegged at $25,000 for the building – as per 2013. The major balance of assessed value is for the land.

The ‘new kid on the block’ that came along is the DEPRECIATION REPORT. That’s now standard for all older condominium buildings. At least here in BC, Canada. Pretty straight forward: Estimate the cost of all facilities and assets of the building, the improvements inside and out, and then look forward for the next 10 years or longer, what needs to be replaced. Prepared mostly by engineering firms who simply estimate all repairs, replacements and maintenance to all building systems and facilities in order to budget the cost for these, to be born by the owners of the condo building and lands. These predicted estimated cost fore casts can largely exceed the assessed value of the property. When only considering the building. At a certain benchmark – let’s say 5 years from preparing the Depreciation Report – when all predicted costs to keep the building ‘alive’ far exceed the assessed value of the building at that time, then the decision should be made to sell out to a developer, land value only.

If I were in a position of funds to permit myself NOT to live in a condo, I would run as fast as I can away from this unfortunate concept of ownership.

[http://homebuying.about.com/od/manufacturedhomes/bb/manufactured.htm]