Before You Buy Your First Home or Condo, Read This!
by China Brooks
The True Costs of Owning a Condo or a Home
I am a fan of renting a small space until you save up for a house (unless you are running a business out of your home - doing workshops, retreats, and events). If you must take a loan do intense research. Never take a loan with an adjustable ARM, and always buy low, never high. With condos, if you take a mortgage, your monthly payment consists of your loan amount, your HOA dues (Homeowners Association), property taxes, and home insurance costs. Add those together and you have your true monthly cost. Remember that broke people ask how much the monthly payment will be while rich people ask about the overall cost. If you take a loan for a house, keep in mind that in 15 or 30 years you will have paid three times the amount of the actual loan. Are you sure you want to do that?
If you have never owned property and you want to buy a condo you must be aware of the HOA. Some HOA's are great; some are run via a management company, and others are run via the homeowners themselves. There are legally binding rules, Bylaws, and CC and R's that your real estate agents must give you. If your real estate agent says nothing about these documents, fire them immediately. You need to read these completely before you purchase anything. I would ask questions such as; how much money is in the reserve, do homeowners in this building usually pay their dues on time, how many special assessments have you had in the last ten years, and who runs the HOA? If the HOA is run by a management company, ask for their information and meet them for a Q and A. Some HOA's are very informal while others are strict with their policies and how they want the building run. Ask the HOA to see their financial records (open up the books) for the last few years. If they are iffy on this, I would think twice.
The HOA of my Studio City property hasn't always been financially organized. The HOA is allowed to levy a once a year special assessment on the homeowners (with 30 days notice). I purchased my property in 2005, and every single year the HOA has asked for a special assessment. They say, “Hey, we don't have enough money for the insurance bill so we need each homeowner to cough up $700 right now.” It got to the point where I had to get smart and set up a special HOA savings account. You need to know what you are getting yourself into before you purchase property.
Research/Do Your Homework Before You Make Purchases
Research and do your homework before you make purchases, especially large ones such as cars, homes, and electronics. Usually I find that most things can be bought for less money. If you have the money and you really want an item, go for it but most technology is old within six months and will drastically drop in price. There have been times when I wanted a pair of shoes, only to buy them and find them on sale somewhere else. I bought some editing software which went on sale for half price a month later. I'm just sayin', shopping around can be a wise thing to do. Remember how in 2007 home prices were completely inflated? Studio City properties went for $355,000 for a one bedroom and today can be purchased for $165,000 to $190,000. Never buy high, always buy low. Know what you are getting yourself into.
Why I Prefer Owning Over Renting
While renting has advantages such as lower costs, I love owning property. Walking into your own home every day is the most amazing and empowering feeling. No one can tell you what to do and you feel completely comfortable in your home. You don't have to deal with landlords or rental drama. You're not paying the mortgage for someone else every month. As an owner, you are free to make all the gorgeous upgrades your heart desires. When you rented, if you made upgrades, you may or may not be reimbursed, and if you move, you are out that money. Some landlords are cheap, and not very nice. With owning, you don't have to deal with that.
Renting has been great for me though because it has made me an excellent landlord to my tenants. I do my best to go above and beyond when it comes to customer service because I realize that a person's living space is so important in their life and it's crucial that my tenants have a wonderful positive experience. I wish all landlords felt this way, but they do not, which is exactly why I own my home.