There are a lot of great places in Florida to buy a condo. For example, Daytona Beach condos are popular with buyers, as are condos in places like Clearwater, and of course, South Florida is always a prime location as well.
A lot of condo communities in Florida are ocean or waterfront, so if you aren’t going to live there full-time, you might be able to earn an income by renting it out.
Before you invest in a Florida condo, the following are some general things to be aware of.
What is a Condo?
A condominium, known as a condo for short, is a low-maintenance housing option.
If you buy a condo, it’s within a community of other units. The condos themselves are privately owned, and then all of the owners share common areas. You only have to take care of your unit’s interior, and a property management company manages the exterior and deals with the common areas.
The fact that you don’t have to worry much about maintenance could already have you sold on a condo, especially if it’s a second home or investment, and you won’t always be there or even nearby.
Condos often have amenities like pools, parking garages, and dog parks as examples. You can then enjoy them as part of the fees you pay the association without worrying about maintaining them or putting them in yourself like you would have to do in a single-family home.
A condo is generally going to be more expensive than a single-family detached property, which is one of the big perks. Whether you’re buying a condo as your primary property or you’re buying one as an investment, there is something to be said for that element of affordability.
If you were going to buy a waterfront single-family detached home in the most desirable parts of Florida, it would probably cost you millions of dollars, whereas a condo can be a few hundred thousand dollars by contrast.
If you are hoping that your condo will earn income for you, condos as rental units usually do very well, especially in resort areas that are very in demand. If the condo offers accessibility and walkability, it’s especially going to appeal to renters.
A lot of couples and families don’t want to pay to rent an entire house on vacation, so a condo gives them plenty of space, but it’s more affordable from their perspective as well.
For some condo owners, it’s possible to cover the entire year of expenses if they rent it out primarily during the peak season.
There are a lot of upsides to condos, but also some downsides. One such downside is that they can be harder to finance, but it’s not impossible by any means.
If you’re buying an investment property, whether or not it’s a condo, a lender may want more of a down payment. Usually, lenders want to see a down payment of 20-25% at least for an investment. Some lenders require that even if it’s an investment property, you live in it for a year before you rent it out, but this isn’t always the case.
When you get a loan for a condo, you’ll probably have to go through a few extra steps, and the rates may be slightly higher. The reason for this is that most condos, especially in Florida, have a homeowners’ association or a condo association. This creates more risk for the lender because what the HOA or condo association does is out of their control.
Your lender will probably want you to get documents from the HOA or condo association. These documents might include information about the condo project and how many units are owner-occupied versus tenant-occupied. The lender may also want to know how many units are owned by any one entity.
The lender might also want to get a copy of the master insurance policy from the condo association.
The objective from the perspective of the lender is to approve you as an individual buyer but also the condo project as a whole before offering to finance.
There are certain lending guidelines for condos. For example, no more than 15% of unit owners can be behind on owed dues. There can’t be one investor owning more than 10% of the units either.
Association Fees and Reserve Funds
When you buy a condo, understanding fees and reserve funds is important because you have to provide this information to your lender, but you also have to understand it for your own personal reasons too.
Investigate how much association fees are and what they cover. Condo associations will have a set of restrictions and rules for renters and homeowners, so you need to be crystal clear on these before you buy anything.
Usually, condo fees will include maintenance of amenities and the common areas, and they may also cover utilities and emergencies.
Along with the operating fund that’s used for paying day-to-day expenses, condo associations will also, or at least should also, have a reserve fund. The reserve fund can be used by the association to cover big repairs or unexpected situations.
Condo boards do have the ability to raise fees if it says they can in the governing documents of the association.
Check the Fine Print
If you’re going to buy a condo and you hope to rent it out, you need to make sure the community allows for that. Some buildings have rental restrictions where for example, you can rent it out, but only after you’ve owned it for a certain amount of time.
Most condo buildings that do allow rentals will sell limits on by-the-day rentals, and some might require that you get approval before you can rent it out.
If you are thinking about buying a condo in Florida, it’s a good idea to work with a realtor who’s experienced in this area. They’ll know the right questions to ask to ensure you choose the right home for you but also that you understand any stipulations or fees that are unique to owning a condo.