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Monday, September 7, 2009

Condo Buying Checklist

I recently moved to a new city and as a result have been looking for a little condo to purchase mainly because renting isn't the smartest idea. But it also depends on one a person's situation. I was able to get in contact with a Realtor who also happens to be an investor and uses numbers and not emotions to acquire properties.

When it comes to a place you want to buy and live in, some of the rules change. Obviously your not going to go always by the numbers because of personal preferences such as location, style, and overall appeal. I have found this one of the challenging things to overcome. Because of my investor mindset and also my personal preference, I always seem to be stuck in limbo, but I was able to utilize this condo buying checklist to assist me for when I do make an offer.

The checklist is broken down into 3 components:
1) The building
2) Legal information
3) The condo coroporation.

Check out the list below. Hope it helps for those of you trying to purchase a condo!

Condominium Purchase Due Diligence Checklist

o How many units in the building? (25+ is best)
oWhat is the ratio of owner occupied to rentals? (look for potential anti-renter situation)
o What is the age of the building? (age important for financing, condition of building’s maintenance important for costs)
o Are there any Deferred Maintenance issues pending (see condo reserve fund study & last 24 months of condo board minutes.)

oIf YES review and estimate total cost of (remember each unit is responsible for their portion of the costs)
Roof replacement or repair? $........
Mechanical (does building need engineer inspection report?) $......
Interior or exterior refurbishment? $.........
Post Tension deterioration? $........
Parking lot resurfacing? $........
Intercom system repair/replace $........

o Is the parking area adequate size (important to tenants and your exit strategy)
o What is the ratio of stalls to suits? (minimum 1 stall per unit advised)
o Can you rent additional stalls?
o Is there adequate onsite visitor parking?
o What is the typical rent for the property? $..........
o Does the opportunity to increase the rent exist?
o If YES by how much?
o What is the building’s previous year’s vacancy rate? %........
o How does that compare to area average? %...........
o What is the typical renter profile in the building? Ie) young professionals?
o Does this fit your desired renter profile?

o Is there any pending litigation against the condo corp.?
o The condo board must reveal this to you – also check board minutes?
o Is there a recent Phase 1 environmental study available?
o Is the property approved for CMHC financing?

Condo Corp
o Talk with the reps of the Condo Board to get a feel for the atmosphere.
o Review 2 years of Condo Board meeting minutes for potential problems.
o Review the Annual Condo Budget
o Compare last year’s budget for accuracy with actual operating costs.
o Review the upcoming year’s budget to see if appropriate adjustments have been made.
o Review the Condo bylaws.
o Do they hold any penalties towards renter units?
IE) renter restrictions, large damage deposit?
o Define whether there is an easy grievance arbitration procedure.
o What are the monthly condo fees and what do they include?
o If they seem high do they include heat and or power?
o If they seem low, is there an adequate amount allocated to the reserve fund for future repairs, or will a condo fee increase be needed?

o Read the rental management contract (and rental pool agreement if in place)
o Are the contracts coming due for negotiations?
o Are management costs slated to increase in the near future?
o Speak with management company representative AND on site manager to get a feel for their thoughts on the building.
o Is there a rental pool in place?
o What is the unit factor distribution of pooled rents?
o Who manages the pool? What is their fee? %........
o Is the Building Insurance Program adequate?
o Review the Condo’s financial statements for an adequate reserve fund vs upcoming required repairs.
o Are there any pending or current cash calls to be paid by the owners?

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