The “condominium” (or “condo” for short) is generally seen as the missing link between renting an apartment and owning land with a house. Commonly, at least in my experience, a condominium is an apartment building in which the units are individually owned but the common spaces are jointly owned by all individual owners.

There is one primary advantage in owning a condominium unit above renting: your equity an an asset with a possibility of appreciation. There is also one primary advantage above owning a house and land, the probability of finding a comfortable dwelling for a lower price.

The disadvantages are numerous:

Lifestyle of dwelling. Living in a condominium is much like living in an apartment building. You are close to your neighbors, and no matter how things appear initially, the walls and ceilings are never as thick and sound-proof as they appear to be initially. If I want to hear the children living downstairs screaming at 3:00 in the morning, I’d prefer to stay in an apartment.

Price won’t increase as much as a single-family house. Even when the real estate market is in an upward trend, beneficial to sellers, the price of condominium units won’t increase as much as the price of houses. There seems to be an endless supply of condominiums. Apartment buildings are often converted to condos when the market is favorable to such a move. Houses, and more importantly the land they sit upon, are much more limited in supply. If you own a condominium you own a certain cubic feet of air within your particular enclosure. You do not own the biggest driver for appreciation, the land.

Association fees. The common areas in a condominium are owned jointly and are usually governed by a board of directors or another group of representatives. In addition to your mortgage and taxes, you will also be responsible for association fees. These fees ensure there is enough funding to mow the lawn, fix the roof, insure the owners against liability, and advertise unsold units.

Association rules. Rules vary from one condominium to another, but they are designed to keep the appearance of the buildings professional and uniform. This supposedly keeps property values higher. Don’t expect to be able to paint the outside of your unit in a way that reflects your personality. Your landscaping options are limited. In many cases, you won’t even be allowed to erect a small flag on your door frame or window. Some associations don’t allow pets.

While I reserve the right to change my mind, I’d rather skip “Apartment Living Part 2” when it’s time for me to “upgrade” my living situation. My intention is not to insult condo owners, it is only to discover what is best for me.

Photo credit: edkohler

As first-time homeowners, we watch more than our share of DIY Network / HGTV / buying and selling home shows. My wife and I work as a team: she concentrates on making home improvements, and I’m concerned with making sure things don’t fall apart. I also worry sometimes that any project we undertake might be a waste of money, or at least, not realize the return that some people promise.

I’m sort of haunted by this phrase that shows up in a commercial for DIY Network’s show “Sweat Equity”, where the host Amy Matthews is heard to say, “You’ll get two dollars back for every dollar you spend.” That might have been true when she said it, depending on which project she was talking about in the specific real estate climate she was in at the time. I asked my parents, who have dozens of years of real estate experience between them, and my father, who is as scientifically-minded as I am, found me a good resource:

Remodeling Online has a “Cost vs. Value Report” that analyzes the average cost of 29 common projects one might undertake to increase the resale value of a home – if not the resale value, at least the likelihood that someone will buy it.

What’s more, they have specific information for different regions of the country, even down to the City level in some cases. Where we live, for example, remodeling the bathroom will recoup 90.9% of what it cost us, when the national average is 78.3%. But none of the projects listed indicate a cost recoupment of over 100%, nationally or regionally, so we’ll probably never get even one dollar back for every dollar we spend. But that doesn’t mean we’ll stop making improvements. It just means that the main reason to make home improvements is for the sanity of the current owners. I’m okay with that.

(Here’s a direct link to where the average numbers come from, as well as complete descriptions for each project analyzed.)

Update: Justin points out in the comments (below) that my comparison isn’t quite fair, since in the Sweat Equity scenario, you’d be doing all the work yourself. The Cost vs. Value table assumes that you’re paying full price for labor, so there’s bound to be some percentage that you’d be saving / recouping by doing it yourself.

This article was written for Consumerism Commentary by Antelope, an entertainment lighting designer working hard to achieve financial security.

In the last year, my wife and I have sold a house in one city, and bought and sold another house in another city. After a bad experience with a home inspector when we were buying our second house, we learned a ton about home inspectors. You can do all of the research you would like, but sometimes you learn things in the School of Hard Knocks.

Believe it or not, some states have no certification requirements for a person to call themselves a “Home Inspector.” if you live in Delaware, Colorado, Florida, Hawaii, California, Idaho, Maine, Minnesota, Missouri, Michigan, Nebraska, New Hampshire, Utah, Vermont, Washington, Ohio, Wyoming, Kansas, Iowa, or New Mexico, your state does not have licensing requirements for home inspection companies. This means that a person could call themselves a Home Inspector, charge you $300 for an inspection, and completely miss major issues. Even when dealing with an inspector in a state with licensing requirements, you are not protected from bad experiences. My wife and I had one such experience with an inspector in Oklahoma City—Oklahoma has licensing requirements—who lied to us during the inspection. After we realized we had to immediately drop $20,000 for a new roof, the inspector told us he thought the seller was a criminal and we should have never bought the house. Unfortunately for us, we had already signed a document holding the inspector for a monetary amount covering only the cost of the inspection.

If you’re interested in finding out what each state requires for its Home Inspectors to undergo for licensing, check out this information provided by Kaplan. States are all listed with the requirements and classroom hours each inspection candidate needs in order to complete state licensing. The Independent Home Inspectors of North America has useful information on this topic as well.

It also helps to check up on references of home inspection companies. Check places like Angie’s List to find reviews for inspectors or their companies and the Better Business Bureau to see if a particular inspector is involved with any disputes or lawsuits. Even searching Google for your selected company can reveal issues with their reputation.

Unfortunately, sometimes you just get dealt a crappy inspector who delivers a crappy inspection. Life isn’t perfect, and real estate often brings out the worst of it.

If you enjoyed this article, please stay tuned to Consumerism Commentary for more from Antelope.

I really enjoy good “data visualization”, which is a fancy, but more succinct way of saying “a way to look at information as more than just numbers.”

Last year, before most of us were aware of the “mortgage crisis,” some enterprising individual took a list of average housing prices in the United States since 1890, adjusted them for inflation, and then plotted them as if they were altitudes on a roller coaster ride. Watch the video, and you won’t be so surprised why the housing market took a downturn:

Earlier this week, a few real estate market survey results were announced in the media. This could be good news for house shoppers. In January, prices of homes on average were 11% lower than prices of homes at the same time last year. These results are based on the S&P Case/Shiller index, which collects actual sales prices.

Here are the metropolitan areas included in the survey and the associated 12-month sales decline (or increase in some cases).

In addition to the national price decline, more people were buying houses in February. According to the National Association of Realtors, an organization whose members would benefit from any positive spin on the housing market, sales by homeowners increased by 2.9% from January to February.

I live in the New York metropolitan area. According to the numbers above, our price decline was less than the average, which has me thinking that there may be more declines ahead. Unfortunately, I can’t predict the future. I’m not shopping for a home right now, so I’m not plugged into the market. I don’t have the desire to lock myself into one location for the long-term and furnish and maintain a home, especially on my own. I’m wondering how much longer I’ll feel this way, however.

When I made the decision to settle down, it will not be a financial decision based on market trends. I will buy when and if the right time arrives for me. I’ll try to make the best buying decision at that time while taking the market into account.

Most people moving from one house to another are buying and selling at practically the same time. This negates the basic effects of the market; the disadvantage you have on one side of the transaction is the advantage you’ll have on the other side. If you’re buying your first house, you don’t have the benefit of the flat market, so perhaps the state of the industry should play a bigger role in the decision.

Would you wait for more positive market signs before buying a house—particularly if you’re buying your first house?

Home prices: Down record 11% [CNN Money]
Home sales rise on biggest-ever price drop [CNN Money]

As my partner and I are active landlords and property investors, it’s no surprise that people approach us with real estate offers. Sometimes they’re great deals, too – people occasionally inherit properties they want to get rid of quickly and therefore cheaply, or learn of a house at a great price that just isn’t selling. With the current housing market downturn, it’s happening more and more.

Recently, a good friend approached us when a realtor suggested he look into renting his house instead of selling it. Though his house was on the market and he was looking to find a buyer, he’d instead gotten an offer from a prospective tenant. Since he wasn’t interested in becoming a landlord, he came to us.

You’ll know from my Ten Tips for Buying a Residential Rental Property series that I closely evaluate all real estate decisions according to a number of criteria including price, location, structure, size, maintenance issues, safety and local regulations. I called upon those ten critical commandments yet again as I analyzed the opportunity. Read the rest of this article »

For some reason, I will never get out of my mind someone once told me shortly he purchased a house he couldn’t afford (and knew he couldn’t afford) with a risky mortgage. He said, “I’m not worrying. Real estate prices never go down.” I wasn’t about to get into an argument; he was a former football player and I was a former clarinet player.

The National Association of Realtors (NAR) said on Thursday that the median price of homes sold in December fell nearly 6 percent from a year earlier to $208,400. The three biggest declines in prices ever recorded have now come in the last four months.

That sounds to me like we’re in a downward trend. Anyone else agree? Merrill Lynch does. The company forecasts a 25% to 30% decline over the next three years in home prices. With predictions like these, I’m glad that I’ve had no reason to purchase a house in the last few years, particularly a house I may need to sell within a few years of buying.

Timing the housing market, like timing the stock market, can lead to financial ruin more often than not. When it comes to finally getting around to buying a house, I’ll do it when I’m ready, finding the best deal for what I want. Even though I’ll have to be aware of market conditions, when the time comes, I may not have the option of waiting for the market to begin improving.

On the one hand, your own home should not be viewed as an investment or worse, counted on to fund your retirement. It’s easy to forget that one spends an incredible amount of money to maintenance and upkeep expenses when you own a house. When people talk about the money make when they sell their house, they simply subtract the purchase price from the sale price, conveniently forgetting about all the expenses they paid, which should be added to the purchase price to determine the real profit.

On the other hand, a home is a major purchase. When spending so much money, it is prudent to consider market conditions, if not to help time your purchase, to at least be aware and prepare for risks that lie ahead.

Sometimes it can be better financially to continue renting than to buy. Would you (or did you) delay or rush the purchase of your home due to perceived market conditions?

Image credit: ♥ellie♥
Homes see first annual price drop on record [CNN Money]
Merrill Lynch says U.S. nationwide home prices may fall 30% [MarketWatch]

One of my dilemmas is the difficulty I’ve had with determining where I’d like to live when I retire some day. In fact, I’m having enough trouble deciding where to live next year. While I should probably solve the more immediate issue first, I still think about how I’d want to live in the future.

This year, I started throwing something around 25% of my overall income into retirement accounts. Of course, I wouldn’t be able to do so without the extra side business income. I don’t want to struggle financially when I finally quit the traditional working lifestyle, so I’m trying to prepare for that today while still making the most of my life in the present.

Recently, Sasha wrote about 10 exotic, affordable retirement havens. This type of living would certainly be an option, but what if I want to stay close to my family? Thirty years from now, retiring in the United States just may not be affordable.

Apparently, there’s an option I never considered. The government is selling off its lighthouses, and retirees looking for “adventurous” living are picking them up. After historical societies have had their pick of the best locations, the remainders are made available to private buyers. I’m more of a land-lubber, so this isn’t going to be my first choice, but I find the idea fascinating.

If you have $30,000 to $200,000 to spare and you’re looking for a location with unpredictable weather and… well, water, then perhaps you would consider purchasing a lighthouse and remodeling it. It could be an interesting life.

For the Golden Years, a Bright Idea [Barron’s]