We’d all like new of course – but can you afford it?Â We all know that new costs more than conversion, right?
Not necessarily. Some developers overpaid for their converions and are now having to sell themÂ at rates which are actuallyÂ higher than new construction.
On the other hand, owners of older resale condos usually have greater predictability of maintenance expenses and monthly fees because the construction defects of new units have been repaired. Defects? Ahh.. yes.. and plenty of them.
Buyers of brand-new condominiums usually enjoy the latest up-to-date facilities and amenities, butÂ construction defects are a frequent problem,Â which sometimes causes complex legal battles unless the builder takes care of them.Â How common is this? I recently read a statistic thatÂ over 80 percent of California condo homeowner associations have sued their builder for construction defects. Perhaps that’s justÂ a California thing, but one things for sure: Outstanding litigation by a condo association can hurt the resale value of thoseÂ condos. What’s more, mortgage lendersÂ might also refuse to make loans to buyers known to be interested in such condos. (As if it weren’t hard enough to get a loan these days…)
By contrast,Â older condo associations often have gradually increasing HOA dues as the property ages and things like parking lots need half a million dollars spent on them. But a well-managed condo association will budget for such expenses and set aside adequate reserves so special assessments won’t be necessary, right? Question is, how many associations are well managed, and even if they are, there’s nothing to stop short-sighted or selfishÂ condo owners voting against reserves – as my own HOAÂ recently did. Of course, selfish owners and incompetent Boards are not just the realm of older associations.
So how about pre-construction? The ultimate investment. Get in there early at rock bottom prices and collect equity for a year or two without having to pay taxes or home owner dues – or even pay for it,Â right? Maybe. But what happens when the developer can’t make his presale requirements and the project folds before breaking ground? What happens then? You get your check back in the mail. If you’re lucky. And you’re back at square one.
So what’s the answer? It depends. It depends on you and your needs, but more than that it depends on the particular development in question, be it a conversion,Â pre-constructionÂ or new construction. You need to know the reputation of the project and the developer you’re buying into, before you take a chance with your hard earned dollars.
You’ve got to ask yourself one question:Â “DoÂ I feel lucky?” Well, do ya,Â punk?