As our children leave the family home, it is only natural to want to downsize by switching to a smaller condo. On the surface this may appear financially viable with average condo prices lower than two story homes.
However, there are a lot of other factors that you must take into account before doing anything as follows:
What is the monthly cost of the condo and what does this monthly fee cover?
How much has the monthly cost risen over the last several years?
Have there been any major capital improvements and maintenance costs over the last several years that have led to a one time cost assessment for every individual condo owner?
Does the condo fund have a capital surplus to cover annual maintenance costs plus some capital improvements? Alternatively if the fund has a deficit, this is a red flag.
Have you reviewed the financial statements of the condo association? This is absolutely essential and far more important than your assessment of the individual unit. If you are not comfortable reading the financial statements, hire a independent accountant who is not associated with the condo to read and assess them for you.
Lastly condo insurance rates are rising dramatically in Canada and will ultimately lead to a combination of higher monthly condo fees plus an additional assessment for each separate unit owner. In some instances insurance premiums have risen this year by up to 200-500% over last year. It is very important to review the building’s insurance rates for both the last several years and for this year in order to determine if the individual condo owners will be required to pay more monthly fees and one off cost assessment fees.
Buying a condo may not be the best decision you make financially.
Consider other options such as renting an apartment or purchasing a freehold property that does not involve any of the negative issues that condos have.