Need advice - looking at 505sq ft condo

[BobLandish]

Not ERE yet but debt free and closing on 6 figure savings. It's time to move and I found a studio in a perfect neighborhood. It's 2.5 miles from work(bike paths almost the whole way), 1 block from library and grocery store. Very safe and trendy neighborhood that I've lived in/near for the past 9 years.

FInancial details:

- Asking price $55k (I would offer $35)
-HOA/taxes are $200-$250
-Comparable rent is $625

So we're looking at saving $400 per month for a ~$40k investment. That's pretty great return. My concerns are:

1.) Loss of ability to move - it would be hard to sell obviously because HOA has restrictions on renters (there's a cap) so there's no investor interest, and it's too small for what people expect in this area.

2.) SO and I planning to move in together in 6 months or so. She's down (Especially when I told her what the cost would be), she's adventurous and is open minded to figure out a way to decorate to make the place roomy. Eventually we both want a yard and a garden but we can hold off for up to 5 years while we build savings.

I like the challenge of making the small space work but I want an "out" if it doesn't work, #1 above is what's making me nervous. I wouldn't mind selling it for a $10,000 loss or so, but I'm not even sure that would be doable in a decent time frame. In NYC, DC or SF this place would be high demand but in the southeast the culture is kind of against small spaces.

Thoughts? I'm wondering if I'm missing something big either + or -.

[jacob]

If you check out some of the other condo threads, here, a big question is:

Are the neighbors loud and obnoxious?

[SimpleLife]

I've been in this boat before. You are very smart, you've done your research on the HOA rules on renters, cap, etc.

It is for this reason that I did NOT buy a condo and instead chose to buy a single family home. Well, this and the fact that the walls were so thin at every condo I looked at, that you could hear every sound from the neighbors (I knocked on doors and asked them even and they admited the building was noisy EVERY time) so it's not just my own observation.

In the end, I had the opportunity to buy a 1 bedrooom/1 bath condo in a nice area much closer to work and close to the waterfront and shops, stores, and cool hangouts for peanuts. I ended up buying a single family home instead. Part of me wishes I had bought the condo as an investment because it was a steal. I don't think I'll see prices like that again in my lifetime.

But part of me is also glad I bought a house instead. If money became tight, I could rent out the extra rooms, or go live in a tent and rent the house out altogether without hassle.

I could do whatever I wanted to do to the house and it was nice being able to have a charcoal bbq in your back yard during the summer. When I wanted to move, there was no need to get on a list to rent my house out; I just did it.

Quality of life and freedom of movement/flexibility are things that put a house at the top of my list. But for you, it's tough to say. A condo in a nice area, that close to work where you can bike to work on a trail, walk to the grocery store a block away, and at that price to boot, man that is an opportunity that is hard to pass up. I think it might be worth it for you, but first, tell me:

-You said it is time to move. Why is that? Just because the SO moving in together situation or?


-How noise sensitive are you? I broke 2 leases at apartments before (paid a fee to terminate early) because the noise from the neighbors was driving me INSANE. I could hear the 70 year old couple below me unroll the toilet paper in the bathroom below me for example. The couple who lived above me liked to do back flips with moon boots I swear. If you are noise sensitive, or your SO is, I wouldn't do it, because you will end up with high cost of selling, possibly in a down market IF you can't rent it out at that time.

-What are small houses in the area going for? If it was a choice of a small 1 bedroom or studio condo for 55K full price or a 3 bedroom house for 100K, I'd take the house every time. It is worth the flexibility, and will be a lot easier to sell than a tiny condo.

[BobLandish]

Thanks for the thoughtful reply!

RE: time to move: Let's see, long story short, my rent is going up and my location is not ideal - it's about 5 mile bike ride to work and not close to anything else important. So regardless of whether I buy a place I plan to relocate.

RE: Noise: I guess noise doesn't bother me unless I'm trying to sleep and I have earplugs for that. My SO lives across the street from the AMTRAK and it doesn't bother her, I think we're good on the noise front. I've only lived in two apartments (2 years at the first and 4 years at the current) and they've all been on the top floor, so if bottom floors are noisier i wouldn't know?

This place I'm looking at was built in 1929, my current place 1949 and my other apartment in 1920 - were walls thicker then? Are the newer/cheaper condos the ones where noise is really an issue? It seems like the thick stone they used back in the day could block more noise maybe? I can't tell if i've just lived in quiet places or if I just don't mind noise.

RE small houses: 1 bedrooms in the SAME building are selling for $127,000. 1,600 sq ft houses in this neighborhood average $400,000. I suppose a small house (they've all been upgraded, the smallest you might find a 3/1 1,200 sq foot for $280,000). $100,000 houses is not an option in this city, unless I moved somewhere where I had to drive to everything.

[JohnnyH]

I've been in this boat before. You are very smart, you've done your research on the HOA rules on renters, cap, etc.

HOA's have caps written in a contract somewhere?... I've seen HOA fees go from sane, to steep, to absolute dealkiller with 50%+ vacancy rates. The whole HOA scene makes me very nervous. If my property taxes are jacked 200% at least I have a way to attempt an appeal.

But I think it sounds good Bob, assuming the HOA/taxes haven't moved much in the last few years.

[Chad]

Here is a nice rent vs buy calculator,

http://www.nytimes.com/interactive/busi ... lator.html

[BobLandish]

@johnnyH

The "cap" is referring to % of units that can be rented out, not on HOA fees. Surely yes if vacancy got very high the HOA could go through the roof.

HOA don't scare me that bad as long as I have the option of just walking away - let the HOA have the property back. Is this an option?

[leeholsen]

i would second the others of finding out the complex and neighborhood.

for instance i live in a condo complex now that is quiet in a nice neighborhood; but used to live in one that was loud at odd hours and had my car broken into.

i would also check what other condos in the neighborhood are selling for. has prices been rising or declining ? i know you want to pay less, but you want a neighborhood trending up; so when youre ready to sell; you have a good number of buyers; else you'll just have people looking for great deals that will turn them into rentals.

[llorona]

I would go for a house over a condo. I bought a condo 10 years ago and it was the worst financial mistake I ever made.

Be wary. Before buying, you should look over the HOA's financial statements with a magnifying glass, with an eye toward making sure they have enough reserves to cover the cost of long-term building repairs and replacements. You've got to make sure they are saving enough for big-ticket items, like roof replacements, water heaters, and emergencies, otherwise guess who will end up with a surprise bill?

[tylerrr]

i owned one condo and never will again......They are usually bad investments.

I HATE....I said HATE noise from neighbors, which all condos have....Most people are self centered and don't give a damn about waking you up.

The whole HOA thing is a form of control that is awful. I'll never give another institution/entity that kind of control over my life again.

I would MUCH RATHER rent an apartment than buy a condo.

Next purchase for me is a house....never a condo again. I may even rent the rest of my life. I enjoy renting and investing my money on the side in the stock market.

[SkyOnFire]

Yeah, the noise may not seem like a big issue at first, but after 6 months of listening to your neighbor snoring through the floors/walls, you will want to remove flesh from bone. Never again will i live in an apt/condo.

[jacob]

Apartment stories (I probably described this in other threads). At our Chicago apartment, we went through 3 tenants above us ...
Above tenant #1: Occasional Call of Duty sounds, stopped at 8pm. No problem.
Above tenant #2: Always walked with a heavy foot. No point in going to bed before her. Did step aerobics at 630a while brushing teeth. ARGH!
Above tenant #3: Landscaper. Got up at 430a after receiving calls to phone starting around 4a. DOUBLE ARGH!

(Most people are trainable if you bang on the ceiling or walls ... like the guy deciding to put up nails for pictures around midnight.)

This was a "vintage apartment" with squeaky floors. Modern buildings are built with better sound proofing. This is a completely different ball game.

I tried to behave like #1 ... no big sounds after 8pm. Before that ... occasional sawing and chiseling (but we had nobody below us).

Train or airplane noises ain't the same as "human noises". It's much easier to get used to the latter.

Conversely, we once spent a weekend in a cabin (a 500+ sqft cabin ) in the BFE among the redwoods. The silence was almost deafening. The ear becomes so sensitive that the blood flow gets loud.

[Peanut]

I have the opposite view to most posters, as I prefer condos to single family homes. I had a real love-hate relationship with our old house, because we are not DIY types and something was always breaking down. Neighbors can be just as much of a bother. We actually received anonymous notes asking us to keep our lawn mowed. I also had worries that something catastrophic would happen (flooding, etc) that insurance wouldn't cover.

In our condo now, all building issues are jointly fixed, etc., and I just feel much more secure overall in the event of big problems developing. Also, I have zero worries about being robbed now, as we are on the top floor, and one of my neighbors is paranoid about security. I feel like I can outsource those concerns to her, and others to my other neighbor.


Will you be on the top floor? If so noise should not be a problem. Also, yes vintage buildings with plaster walls are MUCH better soundproofing than drywall. Check if the walls are plaster. You can hear the huge difference just by knocking on it.

You are young, right? 20s? I think this is a great time to be in a condo as opposed to a house, which will almost always require more maintenance, which means more of your time, energy, AND money. A house also requires more in the way of furnishings, both inside and out. That cost creep can add up. In terms of environment, it's nice to be around people about the same age with similar interests.

On HOA, I second the advice to find out about their reserves. Rule of thumb I heard is 3k/unit, but it shouldn't necessarily be a dealbreaker. You might want to get on the board if you buy in to the complex. That way you can work to maintain reasonable HOA fees, or even trim them potentially. New rule: there is no reason why HOA fees must go up. I was tasked with shopping for a (cheaper) higher-deductible insurance policy for our building just last week.

P.S. If you have/want pets, be sure you know what the condo rules are. There can be weight limits in addition to limits on number.

[Riggerjack]

The condo vs house thing to me comes down to how you use your space.

Is home the place you go to sleep and change before going out? Or is it your primary place.

Many people just don't value the extras that come with a house. Yard, privacy, theoretical quiet, control over your space. For these people, the cost and maintenance are distractions they want to outsource to an HOA.

Me, I'll always go for the house, but to me, my home is my refuge. This is where I want to be. I have spent the time and money to make it the way I want it to be. Given the choice of going out, or staying in, I would always stay in.

Only you can decide how important these things are to you and your SO.

[GandK]

The condo vs house thing to me comes down to how you use your space.

Is home the place you go to sleep and change before going out? Or is it your primary place.

+1.

I love our condo. It is more home base and less castle. It's way more suitable for our nomadic lifestyle than our house was.

[George the original one]

If you're going to move in 5 years or so, I would not buy a tough-to-sell property that likely can't be rented. Doesn't matter how steeply discounted the price is.