Gulf Coast Realtors typically get calls from people that start like this; "I'm thinking about buying a condo and I'd like to check some prices". Most of the calls are from people who have acquired their knowledge of condos from friends or family members. They think ; 1) it's a great investment, 2) we want to retire and live at the beach someday, 3) we have some money in savings and want a second home for our family, or 4) we would like to create a tax shelter that also provides the opportunity for our family to enjoy.
All of these are great thoughts, but most people I talk with have done little or no planning about the purchase. They have the vision of a carefree time of playing on the beach with their kids/grandkids or reclining in a lounger on the deck overlooking the Gulf as the sun sets. We can get you closer to that dream if you understand some basics about condos that allow you to select the right property that best fits your budget and meets the expectations you have for the property.
Rule of Thumb Guidelines
We categorize condos into 3 general areas:
Condotels: A motel converted into a condominium with very few amenities or a new condo that that offers basic amenities such as a pool and may a pool deck food service.
Condominium.: A complex offering multiple pools, some indoor or outdoor, fitness facilities, tennis courts, small meeting rooms, and on-sight food service.
Condominium Complex: A complete complex with multiple pools, conference facilities, tennis or golf on site, restaurants, fitness facilities, and marinas.
Association fees are dues paid by the condo owner to cover a number of items that include the cost of the common areas, building insurance, and a for reserve for replacement for common area depreciation. Other items can be included such as cable TV., phone, water, sewer, garbage, etc.
Note: make sure you understand what your association fees cover. The State recommends that 20% of your dues be placed in reserve for replacement, It does not require it. If your association uses this money for revenue short falls, when items like the pool or building HVAC require maintenance, the association could impose special assessment.
Most lenders require 20-30% down when financing and most will not allow fixed mortgages. Terms are higher than residential rates and limited to 10-15 years. If you intend to place the unit on a rental program and have the rental income pay all expenses for mortgage, insurance, association fees, rental company fees, and depreciation, plan to put 40% or more down.
The 4 sources of income from a condo are: rental income, appreciation, tax deferment, and perks to clients or customers of a business. It is highly recommended you consult your tax advisor or financial planner to discuss the best solution for your financial circumstance that provides protection and takes advantage of all tax allowances. We also recommend you discuss leverage ratios (the use of borrowed capital and the benefits through tax deferment).Paying cash for a unit might not provide the best solution for tax deferment and investment strategy.
That's a lot of stuff to consider. Some you may not have thought about. That's why selecting the right realtor who understands these issue could save you money from day one! It could make the difference of that dream about reclining in the lounge on the deck of your dream condo come true or prevent the nightmare of a money pit!
You can start your search for a Gulf Coast Condo today