In Episode 9 of the Real Estate Investor’s Club podcast, we spoke to condo manager and CEO of the up-and-coming management firm Apex Solutions. We probed Alex on the secrets of condo management, getting some inside info on red flags and green lights.
Here are Alex’s top 5 pieces of advice.
1. Understand what you’re buying.
According to Alex, the first major mistake folks make is to think like they’re buying just one unit. This isn’t strictly true and long term it’s thinking that can hurt you. When you purchase exclusive rights to your portion (AKA the condo itself), you’re actually becoming a co-owner of a slice of a bigger animal: the whole building. You’ll be responsible for maintaining the roof, the foundation, the windows, the facade.
Alex’s tip: You’re investing in more than just your unit. Green light to do due diligence on the state of the whole property before closing.
2. Budgets & Meeting Minutes
Since you’re purchasing a portion of a larger organism, how can you verify it’s overall health?
In two words: budgets and meeting minutes. Yearly meetings of co-owners are documented. You can request meeting minutes and budgets when you’re going through the sales process. In these documents, you’ll see any maintenance problems, lawsuits or other issues. You’ll learn the size of the reserve fund and to see if any major expenses are coming.
Alex’s tip: Green light to request and scrutinize meeting minutes and budgets going back at least 3 years. If there are red flags in the budget or maintenance, you’ll find them.
3. Declaration of Co-Ownership
Long, boring and hard to read, yes, but the declaration of co-ownership is a must-read before you close on a condo. Maybe you can’t rent your fraction or perhaps dogs aren’t allowed. Might be better to know this ahead of time!
Alex’s tip: If you don’t read legalese, get help. Watch for any red flags when it comes to renting the unit, especially if you’re buying it as an investment.
4. Understand the syndicate
Condo syndicates are living organisms. The syndicate is composed of co-owners who elect board members to represent them for major decisions pertaining to maintenance, insurance and administration. Did you know you can reach out to the president of the association to get a feel for the vibe on the board? Don’t be shy!
Alex’s tip: Boards that turn over a lot are a big red flag. It takes time to get to know the financial statements and ins-and-outs of administering a building. If the board members are cycling through every year, it’s a sign of poor management.
5. Get help
Condo’s are more complex than they appear. Your long term investment is tied up with a creature you will not have full control over, the administration of which should be of prime interest to you. Assess the syndicate and the whole building when deciding whether or not to purchase a unit and at what price.
Alex’s tip: Green light to be represented by a Real Estate Agent who is used to dealing with condo purchases. You could also pay a condo manager a consulting fee to sniff around and provide recommendations. If you’re making the decision to get into the condo market, make sure you have someone on your team who understands co-ownership.
You can also reach out to Alex via his company email: firstname.lastname@example.org