Urban Home Buying Tips

Whether you're buying a waterfront condo in Miami or a New York City brownstone, multi-family dwellings like condos and lofts are the norm in big cities. Consider these tips from downtown market pros before buying your urban home.

Level with your co-op broker about your financial situation.

In the high-priced market of New York City, co-ops are the easiest way to break into homeownership. About 80 percent of the housing stock in Manhattan is cooperatives (co-ops), and each one has different financial standards. It's important to be up front with your broker so they know what you're qualified to buy.

"Co-op boards decide how much financing a buyer can use for the purchase," says Richard Ferrari, a broker at Prudential Douglas Elliman in New York City. "Some buildings are all cash, others allow 50 percent financing. The majority allow 75 percent financing."

If you don't have the cash to make a 20 to 25 percent down payment, some co-ops will allow you to use gift money from your parents, while others will not.

Also, some co-ops require that you have a certain amount of cash reserves after the purchase -- sometimes equal to the purchase price. Putting all your financial information on the table can help your broker find a co-op that's perfect for you.

Explore emerging neighborhoods.

You might be able to get a deal on an urban property in an up-and-coming area, but make sure the area is well on the upswing before you buy. An emerging neighborhood can take several years to redevelop. To make sure it's a good time to buy, investigate the area.

"Drive the neighborhood and look for new developments, coffee shops and stores. Those are all signs the neighborhood is on the way up," says John Skrabec, broker and owner of Live Urban Real Estate in Denver.

Investigate a potential building's financial condition.

When you buy a condo, loft or co-op, you're not just buying a property -- you're also buying into the building or community. HOAs govern condo communities, collecting dues and maintaining the common areas. A board of directors takes care of these tasks in a cooperative.

Hire an attorney to research the association's financial stability and its rules before you sign on the dotted line. Your attorney should look at the corporation's yearly financial statements to see how much money it has on hand.

"A co-op should have enough in reserve to do major repairs, such as roof work, and also to redecorate common areas periodically," says Ferrari.

If a building doesn't have a large reserve, they can charge a special assessment fee to cover a big repair. These fees are typically announced fairly far in advance (a year or more is normal), so your attorney should also read the minutes of corporation meetings to see if any fees have been proposed.

"Find out if there are any big, looming repairs for the building. You may have higher costs in bigger, older buildings," says Skrabec.

You can also do some of your own investigating. "Chat people up in the elevator and find out if they know of any outstanding problems," recommends agent Lucas Lechuga of Keller Williams Realty in Miami.

Don't forget to find out about the surrounding buildings and their construction plans as well. You don't want to buy a home overlooking the water, then find out the week you move in that someone is building something taller that blocks your view.

Don't plan to buy a co-op as an investment property.

Multi-family homes can be great investment properties, but cooperatives (co-ops) have very restrictive rules about renting.

"Some co-ops allow a one-time rental of two years, while others don't allow rentals at all," says Ferrari. "This is to ensure that you're buying the property as a home."

While condos are typically much more lenient about rentals, be sure to check the property's covenants, conditions and restrictions (CC&Rs) to make sure you're allowed to lease it to a tenant.

Be prepared for your co-op interview.

After you've applied to become part of a co-op, the next step is an interview with the board of directors. If you're called for an interview, it's likely your finances are satisfactory for the building. Start out by impressing the board with a professional appearance.

"Dress in business attire -- you cannot be overdressed for a co-op interview," says Ferrari.

Ferrari also says that asking questions during the interview is a no-no.

"You don't want to volunteer any information that can hurt your chances of getting the property," he says. "You may want to renovate the whole apartment, and if one of the board members finds out you'll be making noise above or below their place, they may find a reason not to approve you."

If you're asked a question point blank, tell the truth. But the less information you volunteer, the better. Ask your burning questions after you get board approval.

Know what your HOA fees buy.

The monthly HOA fee covers exterior insurance on the building, so the only thing you need to insure is the contents of your apartment. However, if you're in a waterfront area, such as Miami, the fees for the exterior insurance can be steep.

"Insurance fees for the buildings are high because they include hurricane coverage," explains Lechuga.

HOA fees also don't cover individual property taxes for condos, so be sure to factor that into your budget.

Look for bargains in overdeveloped areas.

Even if you think an area is out of your price range, don't rule it out. If market conditions change and property demand slows, you could get a bargain.

"The Brickell neighborhood is one of the finest areas in Miami, but it has been overdeveloped," says Lechuga. "Right now, there are thousands of condos available and prices have fallen by 50 percent or more."

Know the tradeoffs of living in a multi-family building.

Living in a loft, condo or co-op definitely has its perks -- minimal exterior maintenance, a sense of community and lots of amenities -- but expect to sacrifice some freedom.

When you buy a loft or condo, you "have less of a say over fees, and what you can do with the property," says Skrabec.