Many retirees decide to downsize and let go of the burdens of owning a detached property and embracing condo life. Standard condos offer a low-maintenance lifestyle, affordability, and amenities, while communities designed specifically for retirees provide an opportunity to socialize with contemporaries. Some offer independence and security by providing medical care and support services.
“Condominium” can refer to a multi-unit complex and/or the system of ownership. Condo owners only own the interior of an individual unit (not the building or surrounding land) and enjoy shared access to common areas and amenities. Residents pay a monthly fee in exchange for amenities and building maintenance. Here are 11 things to consider before purchasing a retirement condo.
Types of Condos
Types of condos range from new or pre-construction builds to ones that have been renovated or are on the second-hand market. While most are multi-unit housing complexes, “condo” can also refer to tall highrises, townhouses, semi-detached homes, and even detached homes.
“Retirement condos” may refer to age-restricted, or 55-plus communities. These communities offer specific amenities and social support systems designed for older residents. According to Condo Capital, “Age-restricted communities include rented co-housing, owned co-housing, niche communities, naturally occurring retirement communities (NORCs), and continuing care retirement communities (CCRCs).”
While by definition, condos require individual ownership, many retirement communities additionally offer rented co-housing as an alternative. Owned co-housing, like gated communities, active adult communities, and independent living communities, are designed for healthy and active people who are able to live independently. According to Condo Capital, “Niche communities are designed around common beliefs, activities, and lifestyles.” When an area has a large proportion of residents over 60, it is referred to as a naturally occurring retirement community (NORC). Continuing care retirement communities (CCRCs) offer assisted living and nursing home care so you can age-in-place as your healthcare needs change. This arrangement can be more expensive and less independent than other 55 plus communities.
Location, Location, Location
Looking for a change of scenery? Perhaps you want to live out your golden years by the beach or be closer to grandkids or stay near your social network of friends and family. The location of your retirement home can affect your quality of life, finances, and healthcare. In addition to things like climate and safety of the surrounding neighborhood, consider the condo’s proximity to restaurants, shops, pharmacies, etc.
The more affordable your retirement home is, the less likely you are to find yourself hunting for another place to live when you are older. Speak with a financial advisor. You may want to purchase your retirement condo before you retire. Plan a budget based on your retirement income, factoring in association fees, fees for real estate services, the (hopefully refundable) deposit, property taxes, and utility costs, plus personal expenses like medical care. Beware of new construction: Costs can rise once the building is completed and/or the community board is in place.
A couple more things to keep in mind: FHA financing is only available for condos that are approved by the Federal Housing Administration. Forbes advises getting a minimum of $5K in loss assessment coverage to cover your portion of the condo association’s insurance deductible (about $20/year).
Since everyone owns the property, one person falling behind on their dues can cause the entire community to suffer financially. If a fellow condo owner goes into foreclosure, it affects everyone’s property values.
You might miss that large backyard, but you probably won’t miss mowing it. Low-maintenance living comes with trade-offs, such as lack of privacy. Before purchasing, try to anticipate your future lifestyle and healthcare needs and look for features that make it easy to get around, like wider door and hallways and walk-in showers.
Work with a Realtor
A realtor with experience in selling condos can help you find one in your budget and preferred area with a good resale value and the amenities you desire. They can also go over important, condo association documents with you and provide a market analysis of the selling prices of other condos in the building and neighborhood and invaluable insider information, like if the community has any financial, structural, or infrastructure issues. Comfort Life offers these tips:
“Be a hard sell; read the contract carefully before you sign, ask questions and make sure you get all the options you want at the price you want to pay.”
Work with a Real Estate Lawyer
It’s a good idea to have a real estate lawyer experienced in the retirement market review the condo corporation or association’s budget, bylaws, annual financial reports/statements, and make sure the reserve fund for emergencies is in a healthy state. Look into acrimonious complaints/litigation as they can cause a range of problems. Confirm that the condo is eligible to be sold to government-backed Fannie Mae or Freddie Mac. If it isn’t warrantable, you might have trouble getting financing for it or might be charged a higher mortgage rate.
Does the property look clean and well-maintained? Obtain detailed information about the building’s age, condition, and construction standards. Have a home inspection performed by someone well versed in condos.
You might not have had a tennis court, but you can now! The best part? The cost of enjoying these perks is shared among all residents. Retirement condos offer a wide variety of amenities, but most come standard with a pool and gym. Activities like clubs and fitness classes allow you to socialize with neighbors.
Association fees paid monthly to the HOA or condo board can run from a couple hundred into the thousands. While a portion goes to the reserve fund, most of the fees are used for amenity and grounds maintenance and expenses like insurance and trash removal. Ask about historic and forecast maintenance fee increases and amendments, exactly what your fees cover, the fee structure, and what you are responsible for in addition to the maintenance of your unit. Expenses for maintenance on communal things (such as the roof) cannot be paid on your own schedule. Special assessments for insurance increases or repairs may also affect your fees. A history of large assessments could indicate poor financial management.
Rules and Regulations
Not only are there fees, but there are also rules! Find out what regulations residents must abide by. There could be rules about noise levels, booking common areas in advance, trash pickup, outdoor decoration, pet ownership, subletting, outdoor cooking, how long guests can stay, and more. Permission may be required for outdoor work, including landscaping or changing any pre-existing conditions. Ramifications range from fines to foreclosure (in severe cases).