Greetings Real Estate Investors!
In the past on this blog and as a general investment philosophy we love condos because of the low cost of entry as well as the reduced major maintenance as compared to a single-family home. There is however one big caveat…the HOA must be healthy, well organized and controlled by good condo docs.What are Condo Docs?
They are basically the legal instrument that creates the condominium form of ownership. Many people think that condos have been around for as long as single-family homes but the reality is they were invented in the 20’s but didn’t become highly popular in the US until the 70’s and 80’s in (no suprise) Florida. So imagine how complicated it would be if you sold several people bedrooms in your 7 bedroom home and wanted to make sure that each of the owners paid an equal share for everything that was involved in maintaining the home. That is what condo documents attempt to accomplish.
Why are they important? Especially for Investment?
Every condo creates their own condo docs, usually initially created by the developer of the condo and then modified by the condo board that takes over once the developer leaves. The condo docs are so important because they determine everything that happens in the condominium. This can include anything from banning people from going into the pool after 10pm to requiring the registration of every visitor (in extreme cases). But for the most part they dictate the procedures for buying into the condo as well as how the condo can be used…i.e. for owner occupant only for investment purposes.
Why do I need a good lawyer to review them?
Like most legal instruments condo docs are huge and were created by lawyers, so unless you were pre-law in college and have a ton of free time on your hands, your best bet is to have them reviewed by a good attorney. They will spot any discrepancies or strange clauses that could make your life difficult if you are trying to rent your property out. Some condos have stipulations that put a max on the percentage of units that can be used for investment purposes which could obviously become a major issue if you have a unit that requires a new tenant and the condo has hit it’s max percentage.
So are condos even worth the trouble?
Yes…if the condo docs make the condo suitable for investment ownership. They provide so many advantages which outweigh the obstacles as long as you pay a good attorney to do the homework for you. But if you don’t you could be getting yourself into a bad situation and losing money
We would be happy to refer you to some of the best attorneys in the state for handling condominiums but we always advise that you develop multiple relationships with real estate attorneys for many reasons. If you would like more information on this topic please contact us at 305-517-3900.
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