The Saint Paul Condo Blog

I've been thinking about this question a lot lately, and I think I've put together a good list for discussion.

Rentals

It's no secret that our real estate market is down from the highs of 2006-7, the same time when Downtown saw an explosion of new residents.  As we begin to enter that 3-5 year move cycle as we've seen in the past, these new owners are now stuck.  Some are losing their condos to foreclosure, some are selling "short", while others have decided to wait it out.  Then there are those who need to move on, but don't want to damage their credit.  This is why we are starting to see more rentals in condo buildings.  Not all of the buildings in downtown allow rentals, but for those that do, the HOA (Home Owners Association) will need to start making some decisions on how to best manage the increased amount of rental in the building.

Renters sometimes get vilified in condominiums, as the easy scapegoat for all the perils in the building.  I've seen some home owners act just as bad, if not worse than some renters.  But I'd say for the most part, a high percentage of renters are not good for a condo building.  They just don't have the same vested interest as home owners do.

The knee-jerk reaction to increased rentals is to outright ban them, and in my opinion that's the worst decision a HOA can make.  It's one thing if the building you bought into had always banned rentals, you bought it know that.  Others will add a certain percentage that caps the amount of rentals in a building.  This too is problematic.  What happens when you've reached the cap?  It's like banning rentals, now you will get home owners desperate to get out, pleading at board meetings to allow their place to be rented.  Then does the board cherry pick units that will be allowed to rent?  Or will they tell the home owner who wants out they are out of luck?

In my opinion, the best option is for a hefty move-in fee.  It's applied equally to home owners and renters, but if the dollar amount is high enough, renters won't pay it, and the home owner will have to chip in.  This will then make the seller think twice if this is the best possible solution.

Foreclosures

Foreclosures are tough on a HOA in a few aspects.  First, the loss of income to the building.  When a home owner defaults on their mortgage, most forgo paying the association as well.  If enough units in a building are in default, it can effect cash flow.  Second, When the bank takes over, the HOA only gets a portion of the owed money.  Usually just what's is owed AFTER the sheriffs sale.  Third, when the foreclosed home finally sells to a new owner, it usually has a shiny new low price - further dragging down values in the building.

My only advice to condo associations is to not foreclose on liens that are filed on the association's behalf.

Financing

If you remember the title of this post, you might be wondering why I've included financing in the list of challenges facing condo associations.  It's because most of these condo building could do a little leg work and get their HOA approved for FHA financing.  It would be a huge step in the right direction to ease the burden facing buyers.  Which in turn would allow more potential sellers to sell!

Capital Improvements

It's a tough time to spend money as a fiscally responsible home owners association, but if you let your building slip, the buyers won't come.  How long has it been since the lobby has been refreshed?  How about the halls?  Just as a buyer is turned off with a condo that hasn't been remodeled in 15 years, buyers are turned off when they walk into a dated building.  Always having salability on the radar will help immensely with property values and owners pride.

What do you think is a pressing issue in the coming year for condo associations?  Let's discuss below.