I am thinking of buying a condo and I’m a first-time buyer. Where do I start?
That’s a really good question. There are several topics which you need to research and get answers to:
- Location – where do you want to live?
- Size/Space – how large, how many bedrooms/baths?
- What kind of property? Single Family? Condo? 2-Flat?
- What can you afford?
I think once you have #4 answered (What can you afford?) that the other questions will get answered. Having an idea of each of these will allow you to look at your neighborhood options in relation to price, size and property type.
I was thinking of buying a condo but wasn’t sure which was a better value, newer or older construction?
“Value” is a relative term. If you prefer new finishes, then you’re going to prefer a newer rehab or newer construction property. However, this comes with a higher price. If you want the most space (sq. footage) for the $$ then a vintage (older) property will be more attractive. Just remember that new doesn’t mean better because if the construction was done cutting corners or substandard workmanship was used then there will be future repairs/replacements required to correct these faults. On the other hand, older construction ones will need to have their kitchens, baths, electrical and plumbing as well as common area items such as roof, porches, etc. repaired or replaced. Whichever way you go make sure that you have a thorough home inspection done to expose what needs or will need to be done now and over the next 5 years.
How long is the process of buying a house? How long does it take from start to finish?
Well, there are a few stages to this process:
- Education – can take 1-3 months
- Search process – can take 1-6 months
- Finding your property, going through the due diligence phase, getting a mortgage and closing. – will take 45 – 60 days
Best to get started early so that you’re not getting stressed out with a deadline looming over you.
I’m in a lease which ends on 4/30/2018. How soon should I get this process started?
You should get started as soon as possible because the part which takes the longest is to get educated about the market. Also, to expedite the process get pre-approved for a mortgage upfront so that you know what price range you should be looking at. Try to narrow down your search so that you can focus on location and property type in your price range. Once you’ve done that it’ll be easier to concentrate on that. If you’re not sure of location and property type that will take some time to figure out and to make your final determination.
If I have a Lease thru 4/30 when should I close — on 4/30?
In my experience, it’s better to close a couple of weeks before your lease expires. It gives you some breathing room to paint, clean up, do some work and complete the actual move. Having the extra time to complete these things will reduce your stress levels. Since your mortgage payments are in ARREARS, your first payment is not until the first of the 2nd month after your closing. i.e. close on 4/15 your first mortgage payment is due on 6/1.
How do I make sure that I’m not making a mistake when I choose a property to buy?
First of all, make sure that you have several “protection provisions” in your purchase offer documents;
- Subject to getting a mortgage – the lender will do an appraisal and this will help to confirm that the purchase price is verified by an outside appraiser.
- Subject to having a property inspection completed – have a good quality home inspector look at the property to make sure that there are no serious issues or defects relating to the property.
- Subject to your attorney’s review – our attorney will review the condo documents and all other related financial information to make sure that there are no serious legal or financial issues currently or around the corner which would adversely affect you.
I was thinking about buying a 2 or 3-flat. Can you give me some insight into this and if it makes sense?
The idea of owning and living in a 2-3 flat makes a lot of sense. You’ve got other tenant(s) paying rent who help you cover the costs of the mortgage, real estate taxes, insurance & operating costs. You also have a hedge against inflation with the rentals because you can increase the rents to help cover the increased costs of ownership. Eventually, if you move out you can rent your apartment and have the additional income and possibly a positive cash flow as additional income for yourself. The downside is making sure that you have good quality tenants who are timely in the payment of rent and take good care of the apartments. Issues with problem tenants can make a nice investment turn sour very quickly. Also, you will need to make sure that you have the proper upkeep and maintenance of the property and all of the systems. Letting a small issue go uncorrected can become a larger (and costly) problem over time if unheeded. In the recent real estate downturn, the values of 2-4 flats have been hit the hardest of the various property types in Chicago making them an excellent opportunity.