Tuesday, November 17, 2015

6 Things You Should Look For In A Stable Condo

When you own a condo, you own your individual unit, but you are also entitled to use the common areas of the building. Compared to a single family home, when decision making regarding the property is generally your own, in condos most decisions are made by the condo corporation.

This brings with it an element of partnership among your common condo owners. Considering this ownership structure, it is important to feel comfortable with the future stability of the property and the condo corporation.

Source: Ottawa Citizen

6 Factors To Look For:
  1. Professional management by a management company with experience managing condos. This is important because they run the financials of the building, reserve fund studies, board meetings, implementing of operational changes, etc.
  2. An engaged board of directors of the condo corp (who live in the building) and who will act in the best interests of the condo owners.
  3. A low to moderate amount of sale turnover. Generally it is positive for a building to have a limited amount of annual sales in the building and have a building with a majority of long term owners. This is indicative of happy owners and with long time horizons of ownership. Buildings that always have several units for sale is sometimes a red flag of problems and there is always a steady supply of people looking to sell.
  4. Low to moderate amount of units that are tenanted. Having a large supply of owner occupants is usually indicative of pride of ownership in the building and lesser ‘wear and tear’ of the building. Tenants also usually will not be long term, which from #3 above, hurts stability of the building. Having a large supply of tenanted units in the building can also be a red flag that there is an overhang of units for sale that sellers are unable to unload.
  5. Generally stable condo fees. Stable condo fees are indicative of good financial management of the costs and liabilities of the condo corp. If they are changing, make sure they are for a good reason (like increasing hydro and water costs in Ontario, which are out of control of management).
  6. Limited history of special assessments. A special assessment usually comes down when an item or items needs to be replaced or repaired in the building and aren’t budgeted for as part of the reserve fund. We will do an in depth post of special assessments in an upcoming post. Having a limited history of this is generally positive and ties in with #5 of good financial management and maintenance of the building. Having a long history of special assessments can be a major red flag as the building may have serious physical/structural issues.

This is far from an exhaustive list but give you a few general things to look for in a stable condo building. Always make sure to do your due diligence!

Is there something you look for in a stable condo that's not on this list? We'd love to know - leave us a comment!

Russel Lalovich
Office: (519) 966-0444
Cell: (519) 995-5620

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