Condo Buying Tips

Currently there are thousands of condos for sale in the Gulf Shores and Orange Beach areas.  By 2008, the area is expected to have approximately 27,000 condos on the Alabama Gulf Coast.  This is double the approximate 13,000 units that were previously here in 2003.  The potential buyer is faced with a wide range of diversity with prices ranging from $150,000 to over $2,500,000. Our goal with these tips is to provide you with the knowledge it takes to make an educated decision on what is right for you and best fits your needs when purchasing your condominium.

Who is the "Condo Association"?

The Condo Association consists of the owners, including a President, Vice President, Secretary and a Treasurer. The best interest of the owner of the complex is the sole purpose of the association. Decisions that the association make determines how the money collected from condo fees will be dispersed. Before you, as the potential buyer, make a final decision, it would be a good idea to review the financial records of the association.

What type of condo are you looking for?

There are many aspects to consider when asking yourself "what" type of condo you are wanting. What size condo you are considering should be your first thought when determining what type of condo to buy-one, two, three bedrooms, or maybe even more? Do you need something small with only 4 or 5 floors with just 50 or 60 units or are you more interested in a high rise with several hundred units? It depends on why you are purchasing the condo in the first place. Is it for personal use? If so, buy what you want. If it is for a rental property, buy from the prospective of the renter. You must ask yourself if purchasing a condo for rental, “If there is no rental income that month, can I still make the payments?”  Don't assume that your rental income will always cover all expenses. We can find out the rental history on the property you are interested in. Never be afraid to ask too many questions! That's what we are here for!

Where do you want to be located?

You have to determine exactly "where" you want to be. You have so many choices when making this decision. Gulf front or beach view, across the street from the Gulf, on or near a golf course, near the Lagoon, do you want water access or maybe you would choose to be away from it all but close enough to enjoy? Units located directly on the Gulf are obviously going to be your most expensive choice and prices will vary from there. If it's for renting, the most appealing to a renter is how close it will be to the water. Again, if it's for you, you decide what you would prefer.

When you have determined what is best for you.

You should know who covers what when it comes to your property taxes. You can expect to pay about $33 per thousand of the appraised value.  For example,  on a $200,000 unit that’s about $660 a year. However, if it is rented, it falls into a different category and the rate would be approximately twice as much or $1,320 per year.  Alabama’s property tax or ad valorem tax is the lowest of the 50 states.  We will be glad to discuss this in more detail with you once you have decided what is best for you. Remember, ask questions and we will be glad to answer them!

Why are you purchasing a condo?

You have most likely already determined the purpose of the condo you are buying, is it for your primary residence, a second home or vacation home or maybe a rental property? If not, this is your first step in determining what best fits your needs. How you intend to use the property and how you choose to finance the property will ultimately determine your tax position.

When is a good time to consider buying a condo?

Everyone has a different situation so this question depends entirely on the purchaser.  I read once that wealthier and smarter buyers do the opposite of what everyone else is doing.  When everyone else is selling and driving prices down, they buy.  When everyone else is buying and running up prices, they sell.  Currently, there is an oversupply of condos on the market.  Many people have purchased condominiums under pre-construction agreements with the idea of “flipping” and making a small fortune.  The thousands of speculators that entered into these agreements haven’t been able to flip or sell and they cannot or do not want to close thus causing an oversupply of units.  This oversupply of units being introduced at the same time quickly drives condo prices down.

As a result of the prices falling, it is now a good time to buy a condo at the beach!  In addition, the Federal Government has enacted a Go Zone incentive to help rebuild the coastal areas of the United States that were affected by Hurricane Katrina.  For investors or one who is going to purchase and rent a condo, the tax incentives of writing off 50% of the sales price the first year for depreciation could change this decision from a good time to purchase to a great time to purchase.  Go Zone tax incentives end December 31, 2007.  See your tax advisor to see how these incentives will reduce your taxable liability.

Some things to remember when considering purchasing a condo:

There always has to be "fees", it's a fact of life, so I have to remind you of the "Condo Fees". The condo association (the unit owners) has established a fee to cover the upkeep of the property. Things included in this fee are landscaping, swimming pools, basic cable, garbage pick-up and insurance and other things necessary for the property to be maintained under the standards in which you purchased it. You have only purchased what is inside your walls; this means you are responsible for maintaining insurance on your personal property inside the unit. Be sure not to assume the condo fee will always be the same rate as you first paid as it will change to prepare for future expenses.
Also, there is a book of rules and regulations. It's compiled of the "do's and don'ts" of owning a condo. Although these documents have been written with legal advice from attorneys and it can be lengthy and boring, they are easy for you to read and understand. Even though you own the unit, it doesn't necessarily give you permission to do certain things which is the reason for the book. You should read it carefully and make sure that when a change occurs, an update to the book is done.

One last thing:

We hope that these tips have helped assist you to begin your condo buying process and maybe it won't be quite as stressful as what it may have been without a few pointers to get you going in the right direction.