Buying a condo near a college
Buying a condo for your child near his or her college is often a sound investment.
Giving your offspring a place to live eliminates the cost of rent. And if the condo is large enough — say, two or three bedrooms — the extra rooms can be rented to other students to help defray the cost of ownership.
Moreover, over the four-year span until your child graduates — and often a year or two longer these days — your investment is likely to appreciate. Although rising values are not guaranteed, housing near universities and colleges is usually scarce. If that’s the case where your child chooses to matriculate, the law of supply and demand is the rule, not the exception.
Still, although buying a condo as an investment near a college is not terribly different from buying one elsewhere, more thorough diligence is often required.
Here’s one caution that probably never entered your mind: Is the campus likely to remain where it is and not move to another location?
Most likely it will stay put. But it’s not unheard of for a campus to close in one place and reopen somewhere else, says Dan S. Barnabic, author of “The Condo Bible for Americans” (Neon Publishing Corp., 2013).
It’s fairly simple to find out whether a move’s afoot. Simply call the registar’s office, or the school’s president, and ask.
But remember, the time frame that you hold the place might be somewhat longer than four years, and even longer if owning a rental apartment turns out to be a strong investment.
Toronto-based Barnabic, a former real estate agent, broker, manager and condo developer, also wants you to beware of buying into a financially troubled or poorly managed property.
“If there has been mismanagement or the building is in financial distress,” he says, “you could wind up paying dollars to replace the dollars someone else squandered.”
To prevent that, he suggests standing outside the building and asking residents as they walk in and out about their experiences. Are there any maintenance deficiencies? Is management responsive? Are battles raging among neighbors — or perhaps more important, among board members who are elected to run the complex and make sure the rules are followed?
Next, obtain an estoppel certificate, a document similar to a survey for a single-family property, that shows the unit, the maintenance fees, the amount of the building’s debt and any assessments that are either contemplated or set in stone.
It is most important to pay attention to the annual budget. If the budget or reserve is underfunded, you as the owner will be responsible for making up your share of the shortfall.
The author also advises potential condo buyers to obtain a status certificate on the unit they are thinking about buying and submit it to a knowledgeable attorney for a thorough investigation. Here, it is worth paying $100 or more to the board to cover your lawyer’s fees to determine whether there are any outstanding liens against the unit, and whether you will have to pay them.
If there are liens for unpaid monthly or quarterly dues, the board might be open to negotiations to wipe the slate clean. This would let them turn an otherwise non-paying apartment — a drag on the books — into one that pays its dues and assessments on time without a peep.
Similarly, Barnabic says you should gain approval from the board, if necessary, to check with the municipal zoning and planning department to ensure there are no pending work orders or infractions against the condo complex for violations of building codes.
While you’re at it, ask the zoning or permit department whether there are any new buildings planned in proximity to yours, either in this complex or adjoining ones. If there are, your unit’s value could be diminished not only by obstructed views, but also because newer units are more desirable.
Consider investing in any new properties as they go up. But remember, even budgets for brand-new buildings are underfunded, especially if the developer wants his place to look as good on paper as possible. If that’s the case, your share could double or even triple when the builder finally turns the property over to the condo board.
One more thing: People who buy larger units with the idea that their sons or daughters will act as their on-site property managers sometimes find out later that that kind of arrangement doesn’t work. That’s especially true, says Barnabic, when the people who lease the extra bedrooms are friends.
Kids, even those of college age, are not usually very good property managers, he says. “To do a proper job, they must be diligent in collecting rent, maintaining the apartment and refereeing inevitable disputes between roommates. In other words, they must be responsible, and that’s not always the case.”
Distributed by Universal Uclick for United Feature Syndicate.
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