Are You an Investor Considering the Purchase of a Condominium or Townhome?

Are You an Investor Considering the Purchase 

of a Condominium or Townhome?

Have you been thinking about entering the real estate market as a first-time investor? 

Could your investment purchase include a condominium or townhome?  

It's something many are currently considering as each property type can offer advantages to an investor looking to dip their toes in the real estate investment market for the first time.

Here's one example of that being true ...  

Exterior maintenance of condominiums and townhomes is typically taken care of by the HOA (Home Owners Association). The HOA pays for the maintenance out of the fees collected from property owners on a monthly basis.

Especially for first-time or less-than-handy investors, this can be a real advantage to their ownership.  And it makes them an attractive choice for first-time real estate investment.

But if you're considering the purchase of a condo or townhome as an investment property, it's important that you are in possession of some important facts regarding each property type prior to the signing a contract for purchase.  

What you need to know is: 

• That there are differences between Condominiums and Townhomes  
• WHY the differences between the two types of property will matter to you
• HOW those differences affect the ownership you'll acquire upon purchase

You should also know that which type of property you buy ... and the distinctions between them ... will also matter greatly to your Mortgage Lender, if borrowing funds to purchase.  Downpayment, escrow funds, interest rates ... even the mortgage process itself, can be dictated by the type of real estate property you purchase.

For Condominiums:  

• Ownership will mean detailed scrutiny of the financial and legal status of the Condo Association by the Lender
• Loan Approval and Loan Terms will be dependent on the approval of the Condo Association's budget, By-Laws, Declarations  
• The overall "strength" of the Condo Association will also be of major concern to the Lender, as it too will dictate Loan Approval and Loan Terms
• * For loans on Condominiums where the downpayment is LESS THAN 25% of Purchase Price/Value:  The financing can cost up to 3/4 of a point in additional Closing Cost Fees.  Or it can result in a higher Interest Rate incurred than that incurred on a Townhome or a Single-Family Residence
• Condominium Association's HOA (Home Owner Association) dues are typically higher than those of Townhome Projects (a/k/a Planned Unit Developments (PUDs).         

        
       Why?  

• In Condominium Projects:  Common Areas and Building Exteriors are maintained, repaired, and replaced by the Homeowner's Association from funds collected and maintained in what is called the "Reserve Fund".  
• Mortgage Lenders require acceptable levels of Association Reserve Funds, typically 10% or more of the total operating budget, to be set aside in a Reserve Fund Account. 

For these reasons and more, it's vitally important that Investors or any Buyer ... not just Mortgage Lenders ... completely understand that Condominium Rules, By-Laws, Declarations, Management, Budgets impact the cost and "lendability" of the property in question.  And that they all potentially affect the eventual marketability of the Condominium in a sale.  

Also important to know prior to making a property type choice:  As a rule, Townhomes in Planned Unit Developments do not typically have the same issues as Condominiums when it comes time to finance, buy, or sell.  

Subsequently, when it comes time to move forward with the borrowing of funds for the purchase a Townhome, then underwriting of a loan, they do not face the same scrutiny by Mortgage Lenders.  

For an Investor to make a wise real estate property choice, they also need to know the most common differences found between Condominium and Townhome (PUD) property types.  Those are:  

• The distinct legal structure of each property type's Development (Plat)  
• The distinction of who owns the land in each property type:

1. In the case of the PUD/Townhome:  It's the individual
2. In the case of a Condominium:  It is "common ownership" (Association Owned)  

"Clues" regarding Legal Ownership Rights are readily available and discernable to experienced Mortgage Lenders and Realtors.  So buyers shouldn't take chances. 

When buying an Investment Property (or your first property), don't work with rookies.  Choose and consult with an expert when financing or purchasing any attached property, whether they're called a Condominium, Townhome, Duplex, Patio Home, or another localized design name.  

Work with experienced professionals only ...

* Thinking of buying, building, or refinancing a home or Investment Property in New Lenox, Will County, Chicagoland - IL/WI?

For thorough, detailed financing advice and assistance, contact me! I'll put my 40+ years of mortgage experience and expertise hard to work on your behalf.
I'm easily found at:

Gene Mundt

Mortgage Originator  -  NMLS #216987  -  IL Lic. 031.0006220  -  WI Licensed #216987

American Portfolio Mortgage Corp.

NMLS #175656

Direct:  815.524.2280

Cell/Text:  708.921.6331

eFax:  1.815.524.2281

gmundt@goapmc.com

www.genemundt.com

            

  

        

Gene Mundt, Mortgage Originator, an Originator with 40+ years 

of mortgage experience, will offer you exemplary mortgage service 

and advice when seeking: 
Conventional, FHA, VA, Jumbo, USDA, and Portfolio Loans in Chicago
and the greater Chicagoland region, including:  

The Lincoln-Way Area, Will County, (New Lenox, Frankfort, Mokena, Manhattan, Joliet, Channahon, Shorewood, Crest Hill, Plainfield, Bolingbrook, Romeoville, Naperville, etc.), DuPage County, the City of Chicago, Cook County, and elsewhere within IL & WI. 

Your Referrals & Testimonials are Greatly Appreciated!