Are condos THAT bad of a value?

[bignateyk]

I don't get why you would want to buy a condo as opposed to renting. The value of a house is in the land. The house itself is a depreciating asset.

At some point that building is just going to be torn down. Any value in a condo is artificial.

 

[Naeeldar]

Reading this thread is interesting to say the least. So much input from people all over the country.

The fact of the matter is a condo is no different than a house. It COULD be a good value depending on how much you pay, the area, resale, and quite frankly what you want to do with the property.

For example in the Northeast, especially around metropolitan areas like NYC, Philly, Boston, condos can be a great value for a first time buyer. Housing in general can be extremely expensive and so the condo will usually allow you to get something nicer and newer for less then a home that is 30 years or older. But you also need to consider HOA fees and what you plan to do with the condo - BUT THAT IS NO DIFFERENT THAN A HOUSE.

For example the condo I bought for my first home was at 26 - 2 bedroom 2 baths about 15 years old for a simple $157,000. Was decent and I could have went up to about $230,00 myself at the time but the fact of the matter is I knew I would be able to to hold on to the cheaper condo forever and rent and the price/value was right. At $157,000 with taxes and the HOA fees ($125 a month over 3 years it's gone up to $135) my monthly expenditures comes out to $1,215 a month and the hoa fees include water. If you compare renting in this area a 2 bedroom apartment would tend to cost about 1300-1400. People regularly rent out condos in my complex for 1000-1100 and do it easily. So the value was there for me since I don't want to resell.

If you plan on moving in 5 years whether you buy a house or condo you are going to lose money.

Anyway the type of property you buy has very little impact onto value. Condo, Townhouse, commercial building, home, rowhome etc... can all give you a decent ROI but you need to understand what you want to do with it both short and long term and the value of the property related to the local economy.

 

[aldamon]

We just moved into a historic loft in an awesome downtown location next to or within walking distance of every major amenity and are selling our house. We would not have bought a condo outside of town or anywhere else. Too risky IMO when there is not a location advantage.

I have to laugh at the comments about HOAs and assessments here. If you could only see what we spent to renovate the house and fix things. Let's just say I'm not scared of assessments or HOA fees at all. After finishing the work (about two years or so) I just looked at it and thought "Well damn, the clock is ticking again and it's never looked better" Time to sell! So we'll get assessments? Who cares? Houses and condos cost money over time. It's just semantics whether you call it an HOA fee or maintenance budget for a house.

 

[notposting]

Downtown for me, Birmingham for her.

Thanks for the thoughts, all. Keep them coming.

Ahh. I guess I'm a little off since being in construction I end up having to drive everywhere. Seems like her commute could be the tricky one, it's nice to have one person with a short commute. You could be anywhere and get to downtown pretty quick (696, 75, 96, 94) but Birmingham is a little tougher. Try looking into neighborhood areas like NW Livonia, Farmington, Farmington Hills, even the right spot in Northville can get you on the freeway quickly.

Hell, check out West Bloomfield for that matter. You should start taking some scenic tours on weekends to scout out neighborhoods as well...there are some really nice areas you might not ever really see from the freeway or mile roads.

The HOA behind our apartment complex charges $120 annually, does snow plowing, has some private parks, and a lot of crazy people who manicure their lawns. No fences in front, only little ones in back, any addons must be approved blah blah...but the neighborhood sure looks nice.

 

[rcpratt]

Ahh. I guess I'm a little off since being in construction I end up having to drive everywhere. Seems like her commute could be the tricky one, it's nice to have one person with a short commute. You could be anywhere and get to downtown pretty quick (696, 75, 96, 94) but Birmingham is a little tougher. Try looking into neighborhood areas like NW Livonia, Farmington, Farmington Hills, even the right spot in Northville can get you on the freeway quickly.

Hell, check out West Bloomfield for that matter. You should start taking some scenic tours on weekends to scout out neighborhoods as well...there are some really nice areas you might not ever really see from the freeway or mile roads.

The HOA behind our apartment complex charges $120 annually, does snow plowing, has some private parks, and a lot of crazy people who manicure their lawns. No fences in front, only little ones in back, any addons must be approved blah blah...but the neighborhood sure looks nice.

She doesn't mind her current commute too much - we both live in Novi right now. 696 sucks obviously, but it's a bitch to get to Birmingham pretty much regardless. We both grew up here (Northville for me) and both sets of parents are here, so it's convenient. We do plan on doing a little bit more looking in Northville. We don't have a problem with anything to the east of us, but it would have to really wow us, I guess.

 

[Chiropteran]

I don't get why you would want to buy a condo as opposed to renting. The value of a house is in the land. The house itself is a depreciating asset.

At some point that building is just going to be torn down. Any value in a condo is artificial.

In the long term, sure. But most buildings will stand for 100 years or more, baring a natural disaster or a huge buyout offer. I'm not too worried about my condo falling apart 20 years after I die, as I expect to have sold it by then.

Also, you do own land in a condo. Not as much as you would with a house, but it's typically at a far more valuable location. Not very many houses in the middle of the city.


Edit: also, to directly answer your question: I bought a condo instead of renting for a variety of reasons, but the biggest is to save money. My monthly mortgage + condo fee+ utilities is fairly comparable to rent, but by buying instead of renting I have some very nice tax deductions which will save me thousands of dollars. I also have a cat and a dog, when renting it's a huge hassle to find places that will allow both and even if they are allowed a lot of apartments in the area demand "pet rent" of $100 per pet per month, or some kind of pet deposit, or other extra fees.

The biggest reason is security given the current economy. I have a good job, I don't worry about losing it- my only worry was that when the real estate market turned around my rent would skyrocket. Inflation might occur, and I can't count on my paycheck to match inflation. By buying, I lock in a huge portion of my monthly expenses so they won't rise, ever. Like I said, right now I pay about the same per month as local places charge to rent. But if rent continues to increase at the current rate, it'll continue to rise while my mortgage remains the exact same.

 

[Capt Caveman]

So much ignorance in this thread.

 

[Sheep]

I don't get why you would want to buy a condo as opposed to renting. The value of a house is in the land. The house itself is a depreciating asset.

Example using my own experiences:

Rent an apartment with water and garbage included:
5 years
12 months/year
$1000/month rent for a 1 BR, 1 BA place
---
$60,000, none of which I'm getting back when I move out.

Buy a condo with water, garbage, and heating included in HOA fees (the last one's pretty damn important in Chicago):
5 years
12 months/year
$1100/month mortgage for a 2 BR, 1 BA place
$250/month HOA fees
---
$81,000, a good chunk of which will be recoverable when I sell and move out. I bought just under 2 years ago, well after the bubble burst so I'm not completely screwed like people who bought at the peak are.

According to Zillow, houses in my neighborhood START at $400,000 so that's not an option for me.

And some of us hate the suburbs and the sprawl associated with it and only go to the country on vacation to visit.

 

[rcpratt]

Example using my own experiences:

...

This is pretty similar to my situation.

Renting:
$1250/mo for a 1000 sqft, mediocre quality, 1BR 1BA place.

Condo:
$1250/mo for a 1500 sqft, brand new, 2 BR 2.5BA place

Now, through let's say the end of 2016, about $15,700 would be applied to the principal on the mortgage -- possibly much more if I make extra payments. As long as the condo loses less than $15k in value in that time, I come out ahead. End of 2017? $19.5k. That seems like a decent bet at worst. Even if it loses $20k in value, well, I got a much nicer place to live in for the past five years.

 

[Chiropteran]

Don't forget the tax benefits.

 

[jagec]

I don't get why you would want to buy a condo as opposed to renting. The value of a house is in the land. The house itself is a depreciating asset.

At some point that building is just going to be torn down. Any value in a condo is artificial.

Do you get why someone would want to buy a car as opposed to leasing? Cars depreciate even faster.

People buy condos because (sale price-purchase price+utilities+taxes-tax credits+association fees)/(months of residence) <<< monthly rent+monthly utilities.

At some point civilization will collapse and all land deeds will be invalid, so it's not like land has permanent value either. ALL value is artificial.

 

[vi edit]

When you factor in the rent vs. buy and figuring payments, are you also including taxes in the buy scenario as well as realtor fees when selling? Plus there are other costs like the cost of the mortage ($1500+), painting when selling, little things you do for upkeep. Ect. And unless you have a massive mortgage payment and property tax bill the tax benefits really aren't as big as hyped by many people.

Not taking a side in either direction, but if you are staying for 5 years or less renting really does more sense for a lot of people.

 

[vi edit]

Oh, also you have things like rental insurance vs. home owners. $100 a year vs. $500+. Again...just a lot of nickel and dime things that people don't think about when buying a home.

 

[rcpratt]

When you factor in the rent vs. buy and figuring payments, are you also including taxes in the buy scenario as well as realtor fees when selling? Plus there are other costs like the cost of the mortage ($1500+), painting when selling, little things you do for upkeep. Ect. And unless you have a massive mortgage payment and property tax bill the tax benefits really aren't as big as hyped by many people.

Not taking a side in either direction, but if you are staying for 5 years or less renting really does more sense for a lot of people.

Yes. Principal+Interest+Taxes+insurance+PMI+HOA will be within 10% of my current rent in either direction at most of the places we are looking at. Didn't count realtor fees and closing costs, so I guess that trims the margin a bit. We would paint when we bought, but other than that I don't expect much more upkeep costs compared to the apartment. I'm sure it will happen, but in a brand new place like that it would hopefully will be minimal.

With this small of a mortgage, the tax benefits wouldn't be hugely significant, but it would help offset the above to some extent.

 

[Chiropteran]

Oh, also you have things like rental insurance vs. home owners. $100 a year vs. $500+. Again...just a lot of nickel and dime things that people don't think about when buying a home.

Not sure if this is a local thing only, but the mortgage payment includes taxes with my loan, so I don't ever forget taxes. And for most condos, the building has it's own insurance included in your condo fee, so you only need to personally insure the inside of your unit, which really isn't much... $220/year for my condo.


Also, rent just goes up up up...

http://www.apartmentratings.com/rate?a=MSAAvgRentalPrice&msa=8872

My mortgage will remain the same for the next 29 years, except for minor increases if my assessed property value goes up and increases my taxes... but if that happens it means i'll be making more money back when I sell.

 

[vi edit]

Property taxes go up and up and up and up. Rates in my area have gone up $500-$1000 a year over the last 5 years in my subdivision. It's terrible. Prices *can* go down. I lost out on a refi because I appraised $30,000 less than I was at just under two years ago. Home owners insurance goes up.

Buying isn't a slam dunk that it's made out to be.

Just wait till your taxes take a big hike at some point and your escrow company doesn't account for it and readjusts your escrow amount by 2x to recover. That's good times.

 

[PingSpike]

Really though if you're planning to leave in 5 years don't buy anything. That barely made sense in the crazy boom market. It makes none right now.

 

[Chiropteran]

Property taxes go up and up and up and up. Rates in my area have gone up $500-$1000 a year over the last 5 years in my subdivision.

Property tax is based on assessed value. Assessed value should follow real value at least to some extent. If your property taxes are going up up up, that means your condo or house is going up up up in value, not such a bad thing.

But when you are renting, and rent goes up, you gain nothing in return.

 

[rcpratt]

Really though if you're planning to leave in 5 years don't buy anything. That barely made sense in the crazy boom market. It makes none right now.

I'm not planning to do anything. But the earliest I could see myself leaving is 5 years.

 

[vi edit]

Property tax is based on assessed value. Assessed value should follow real value at least to some extent. If your property taxes are going up up up, that means your condo or house is going up up up in value, not such a bad thing.

But when you are renting, and rent goes up, you gain nothing in return.

That's not entirely true.

Have you looked into what actually accounts for property taxes? Police & fire department salaries and costs. Road maintenance. Libraries. Schools. Public school retirement funds. Ect. All of those things can go up in cost without actually reflecting an increase in property values. It's not a direct relationship.

 

[jagec]

That's not entirely true.

Have you looked into what actually accounts for property taxes? Police & fire department salaries and costs. Road maintenance. Libraries. Schools. Public school retirement funds. Ect. All of those things can go up in cost without actually reflecting an increase in property values. It's not a direct relationship.

In many areas, property taxes are computed as a certain percentage of property value. Yes, the taxes go to pay for police and fire and all those other things, but they aren't tied to those costs.

Which means that when the housing market broke, a lot of police/schools/libraries etc. ended up with a budget shortfall.

 

[JTsyo]

Is that first one labeled as condo really a townhouse? I think of condos as being like apartments you own.

 

[vi edit]

In many areas, property taxes are computed as a certain percentage of property value. Yes, the taxes go to pay for police and fire and all those other things, but they aren't tied to those costs.

I understand that. But there are also a lot of other refferendums, expansions, and other things that can be added to a tax bill without really affecting your properties overall value. At least you have the option on voting for against a lot of those. And the county can up the multiplier on your assessment value and raise rates that way without your value increasing.

 

[ussfletcher]

Downtown for me, Birmingham for her.

Thanks for the thoughts, all. Keep them coming.

Quick thought, I haven't looked for properties in the area however, but what about Troy/Royal Oak?

 

[Exterous]

Quick thought, I haven't looked for properties in the area however, but what about Troy/Royal Oak?

I seem to remember Royal Oak being pretty expensive compared to Novi housing. Housing gets even cheaper in Wixom

If you are ok with Northville, Plymouth might be another good option. 275 can be a bitch (as I'm sure you know) but IIRC the area is pretty nice and I don't think it would add too much to her commute