Condo resale value

[condobuyer]

Hello everyone,

I'm looking at condos in Uptown, Lowry Hill east, 50th in France in Edina area, west calhoun, and excelsior and grand area.

Any sense on the best area for resale value/potential upside?

[mnmike]

It really all depends on many many things...all of the areas you mention you can find some great options for investment, but it depends on where your priorities are and what your range is. I know there are at least a few folks on here with real estate licenses...myself included. Shoot me a PM if you have more detailed questions...but your best bet is probably to talk to a realtor:) Very low inventory right now, so sometimes hard to find what you are looking for. Good luck!

[aeisenberg]

Hello everyone,

I'm looking at condos in Uptown, Lowry Hill east, 50th in France in Edina area, west calhoun, and excelsior and grand area.

Any sense on the best area for resale value/potential upside?

All of those are high demand areas. It really comes down to the unit itself and the building / management. A good unit will hold its value relative to neighbors. Just make sure you work with an agent who knows the difference between a good unit and a bad one, not just someone opening doors and asking "do you like it?"

[MNdible]

Also, the cost of the condo association fees vary hugely from place to place so be wary of that. And be wary of a condo that has low association dues but has spent their reserves down to nothing with lots of deferred maintenance just down the road.

[Tyler]

newer the better. and be very wary of the y2k conversions.

[Condo_Dweller]

Another tip is if the condo association allows no more than 20-30% of units to be rentals. Lenders look unfavorably on anything above that, as well as FHA. You want owners who live there and have a stake in ownership. Plus, the added benefit is that you will have stability of residents and less transient ones.

[QuietBlue]

The FHA limit is currently 50%, and I've never heard of lenders caring as long as it is below the FHA limit. But I would agree that a higher owner-occupied rate is more desirable.

[twincitizen]

There's some good discussion happening over in the Legacy Condos project thread: https://forum.streets.mn/viewtopic.php?f ... &start=120

Several folks have made the suggestion that high association dues have a downward effect on appreciation, really restraining how much the value could grow. Case study #1 in Minneapolis is Summit House (400 & 410 Groveland). Nice older building, great location, but the association fees are eye-popping. I'm sure the prices have crept up in the last couple years as supply of existing condos has fallen near zero, but you'd expect the units would cost a lot more than they do.

[mattaudio]

How are association dues calculated? I assume there's some sort of reserve/escrow balance that needs to be maintained? And everyone pays in proportion to their assessed value? Wouldn't there be cases where an association is churning through deferred maintenance, and the association fees would go down once that list is exhausted?

[QuietBlue]

The short answer is, dues are determined however the owners want after taking all the various factors into account (or not, depending on the HOA or other governing body). But there may be requirements based on certain situations -- FHA certification requires at least 10% of the dues go towards reserves, for example.

As for what everyone pays, that varies too. For most places, the dues are the same for everyone, period, to simplify things (my place does it this way, and I'm going to try to change that). But there are associations where the dues vary based on the size of the unit, the idea being that a larger unit will not only have larger shared structural elements (walls/roof/driveway/etc), but there may also be more people living in them too, thus causing more wear and tear on the common property. A lot also depends on the language in the association legal documents, and state laws can come into play here.

I've never heard of assessed value having any bearing on HOA dues; that would be asking for trouble if values decrease, because the maintenance expenses aren't going to drop just because the value does any more than they would for a SFH non-association home (EDIT: I think I misread you here and you were asking about them being set proportionately based on assessed values. I don't know if this ever happens or not, but I don't think so).

As for reducing HOA dues because of less need, it's much more likely that an HOA would just hold off on increases and bank whatever they didn't need at the time in their reserves, because at some point, there will be more work to be done. I guess it's possible that they would choose to reduce them, but I doubt most would.

(source: condo owner for 11+ years, and former HOA board member)

[amiller92]

Our downtown condo association fees depended on square footage, I think. Or at least units that were the same size all paid the same fee, with the larger units paying more than the smaller ones.

As for the relationship between fees and appreciation, I'm not sure that's clear. A well-maintained building with a lot of amenities should remain attractive and thus appreciate fine. Although I do think mortgage payment + fees puts a cap on the value of a unit, but that should be baked into the purchase price already.

I'd just worry about fees relative to the perceived "luxury" and amenities offered and quality of maintenance.