Eight areas to understand Before
buying a condo!
By
Steve Warren; RE/MAX of Gulf Shores, Gulf Shores, Al 36542
There are
approximately 14,000 condo units in the Gulf Shores and Orange Beach area.
Prices range from the low side of $100,000 (1 bed/1 bath, not on the beach)
to the high end of over $4,000,000 (the Penthouses). The number and
diversity of condos here provide the buyer with many choices. Here are some
considerations based on our experiences, observations and thoughts.
Steve's point number 1: Don't Start Blind
Have an Objective/Purpose. Our advice is to definitely start by
thinking through your objectives and purpose before making any decisions.
Are you buying for your personal use only, as a second home, as a rental, a
vacation home or maybe you are not sure yet? Defining the purpose of your
purchase is critical to doing things right the first time. Your choice
influences what you buy, where you buy and the way you finance the project.
How you finance and how you use the property will greatly influence your
"IRS" tax position. It will also impact your "property"
tax position. It is important for us to work out your personal plan of
action before making a commitment to buy anything. We work
with our clients to fine tune this process.
Be cautious about buying a rental property expecting the "rent
income" to cover expenses. Granted, if you put enough money down, any
income could cover the expense. A good question to ask yourself
is "Can I make the monthly payment if the rental income that month is
zero?" Ask us how to "run" the numbers.
Steve's point number 2: Know the Turf!
Location is everything. Where and what to buy: on the Gulf, across the road
from the Gulf, on the lagoon, on Perdido Bay, on the island, water
"view", water access, boat slip, boat dock, on a golf course,
near shopping areas and the list goes on and on. The most expensive place
to be is on the gulf beach, from there, prices go down. Your purpose for
buying will influence location. On or near the water has great appeal. If
you are going to rent the property at all, proximity to the water is a
major factor in the rent rate and income potential. Get a rental history on
the property before buying it. Ask us about this.
Steve's point number 3: Don't buy a 3 bed, 1
bath unit! (Functionally outdated)
Type of condo. These can be tough
decisions; your objective should dictate what to do here. Condos come in 1
bed, 2 beds, 3 beds and sometimes more. They come in high rises (20
floors/hundreds of units) to mid size (4-6 floors /40-50 units) and down to
single or two story units. If you are buying for personal use only, buy it
for you. If you are going to be involved in a rental program buy it from
the prospective of the renter and check out the rental history of the unit.
Getting all of this information together can be more complicated than it
appears.
Steve's point number 4: The "Second"
Monthly Payment!
Condo Fees. Condo fees come with the
turf. This fee is collected by the condo association (or their management
company) to cover the upkeep, landscaping, insurance, some utilities, maybe
cable TV and a host of other things required to maintain the integrity of
the property. You are not buying the building, you
are buying the space inside the walls of the unit. You are responsible for
everything within your unit. This includes the insurance on your personal
property (furniture and possessions). The "condo fee" can be a
moving target. It is set by the condo association (all the unit owners). To
keep the fund solvent and able to deal with upcoming expenses it is
evaluated and changed to match the needs. What are their reserves?
Steve's point number 5: The Majority Rules
Condo Associations. Since a condo complex is a community project it
is governed by its community organization. Hence the "Condo
Association" was born. Its purpose is to look out for the owner's
interest and act as a collective agent when it comes to making decisions
about the property. There are elected officers such as president, vice
president, secretary and most important the treasurer. Money collected
(condo fees) is dispersed by decisions made by the association. The majority rules. A buyer should review the financial
position of the condo association before making any commitment to purchase.
The rules and regulations governing these groups are written to keep them
solvent and out of trouble.
The "Condo Docs" as they are called can have up to two hundred
pages of rules, regulations and amendments.
Steve's point number 6: The Rule Book's Small Print!
Condo rules and regulations. This many paged
document spells out very clearly what you can and can't do on the property
and in the condo unit. (No ten foot satellite dishes mounted on the side of
the building) These documents are written in legalize and can have hundreds
of pages. Sometimes the condo association votes to change the rules and
never updates the "docs". So if there are addenda, be sure get
the updates. It pays to know what's in the docs but reading them can put
you to sleep rather rapidly.
Steve's point number 7: What do you mean "It's
not covered?"
Property Insurance. The condo fees collected each
month by the condo association pay the insurance on the building. Over the
last couple of years the insurance rates have gone up substantially. This
has led the associations to levy an assessment to cover the added costs.
You are responsible for paying the insurance on the personal property in
your unit. Depending on your purpose of ownership, this could be as simple
as a rider on your current home owner's policy but more than likely it will
involve a policy written by a company that specializes in beach area
properties. Knowing the details of "Who pays what" before
something happens beats the stress of trying to find out after the fact.
This can be a lengthy issue, ask us to fill in the details.
Steve's point number 8: The Tax Man?
Property Taxes. This can be a very confusing
issue but it's great to know Alabama
has one of the lowest property tax rates in the country. The property tax
on your unit is based on how it's used. If it is not rented, as rule of
thumb, the current taxes are around $33 per thousand of appraised value. A
$100,000 unit would be around $330 per year. If it is rented, the program
changes and the tax rate goes up to $660 per $100,000. We have the
details available. We need to factor in your plans and objectives to
determine the final property tax figures.
Summary
This document is intended as an information source
to help you make an educated decision. There are many variables involved
the buying process. Taking some time to work out your personal plan of
action is the first step to success. Helping people get where they are
going, is what I do best. All we ask, if we do a good job of
helping you, is that you stay with our team through the process.
If this information is helpful and you feel we are the right team
for you...
GREAT! Let's put together a PLAN that fits your needs and goals.
Steve Warren, the Gulf e-Team Leader
RE/MAX of Gulf
Shores
645 Gulf Shores Parkway
Gulf Shores, Al 36542
Direct to my cell phone: 251 752-4000
Toll Free: 1 (800) 686-4005
Web sites:
http://www.gulfshoresmls.com
http://www.gulfcam.com