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Buying in a single family unit condo community

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  • Buying in a single family unit condo community

    My spouse and I have become interested in a new community being built in our area. The homes are single family, 2-3 bedroom, homes on about 0.3 acres each. There are condo fees for maintenance of a common septic and some common green space. We can afford it, but the housing prices are quite high in our area. Due to how small the lots are, we would likely want to move in ~5 years as our family grows. Does anyone have experience buying into communities such as this? Do prices tend to stay stable or match the market? We just don't want to lose a ton of money.

  • #2
    (bump - this is a first-time poster)
    Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087


    • #3
      I think it depends on how the long the development of the community will continue. Usually in a single phase community development, the price match the market from what i seen around where we live but if the development continue in multiple phases price mostly it stays more stable.  Of course there are other factors such as market conditions, location,  school district, local taxes etc. but if you are buying brand new home you are paying at least 10-15% premium. You should look at the current listing and comparables around your area to get an idea.


      • #4
        .3acres for each condo in a HCOL area?  Need clarification on that.

        For Real Estate - all things are local -- school, location, and comps are big factors.

        condo fees tend to eat into any appreciation and are NOT deductible; hence the lower benefits of cost savings over a Single family house. --- especially if the fees are high.

        Consider your time horizon on the move and real potential of 5 years vs earlier--especially if you're concerned on the loss potential  vs  simple rental near term until increased certainty.


        • #5
          Each unit has a ~0.3 acre lot individually. All of the units are being built over the course of the next year. It is a high cost of living area in the suburbs outside of Boston.


          • #6
            If you have looked at other homes and condos on the market, you should have a pretty good idea of relative value in your community.  If this feels like a good value compared to other properties you have seen and you like the home, then it sounds like you are making a reasonable decision to buy it.

            You can also compare the cost of property taxes and condo fees added to your mortgage payment to the cost of a single family home.

            Younger buyers these days often do like the amenities and convenience of maintenance provided by a condo association, so your resale value could be good.

            Because of high transaction costs, it is better to buy a home only when you plan to stay put for a longer period of time.  If you think you will stay for a minimum of 5 years, then that sounds like a reasonable time period to make it potentially more worthwhile to buy rather than rent.  When we bought our first home, we rented until we were able to buy a home that we could stay in for 2 decades.  The longer you stay, the more likely the financial aspects of the purchase will work our favorably.


            • #7
              I'm assuming you're renting now, but I'd only buy if I planned on sticking around for more than 5 years, maybe even 10 years.  However, I'm a pro-rent person.  Maybe you could post some numbers (rent, home price, taxes/fees, etc.) here so others can crunch the numbers and give a more objective answer.


              • #8
                We are currently renting a 2 BR apartment for $3175 plus utilities. It is through Avalon apartments and we have heard that rents often increase by $200-300/month after the end of your first-year lease. Our lease ends on May 1st.

                The house we are considering is $799,000 in a town where taxes are $16.45/$1000 of valuation and the condo fee will be $180/month. It would certainly be an upgrade as we would have a 2 car garage, a small yard, and more space.

                I tried to find houses to rent before we signed our current lease and throughout this year and there isn't really anything available as it is somewhat of a vacation area and people only give out summer or winter-only leases for extremely high weekly prices during the summer.


                • #9
                  Not sure if you played around with the NYT rent vs buy calculator, but it shows you're right around that rent/buy threshold based on how much you pay for rent, so I think going either direction isn't unreasonable.  That rent increase is a lot though, is that because you got a first-year deal or do they increase that much every year (which seems unsustainable)?  What's stopping you from buying the 'forever' house now?  Personally, with the numbers provided, I would continue renting until I could buy that 'forever' home.  Unless rent increases are out of control, I think financially it's likely a wash, but the hassle of buying/selling would have me lean towards renting.  I know it's subjective, but 0.3 acres doesn't seem small at all.