The Wall Street Journal
By Dan S. Barnabic, October 31, 2014

The allure of the carefree condo lifestyle has attracted many. Among them, retirees who became tired of the everyday chores of maintaining their traditional homes.

Enjoy the condo lifestyle and keep the home investment

By Dan S. Barnabic

The idea of moving to a well-appointed condo building that provides amenities such as swimming pool, spa, concierge service and being close to outside amenities such as shopping, entertainment, and eating establishments, have made many retirees move, or otherwise contemplate a move, into condos.

As I discussed in my previous article, “Should you buy or lease your retirement condo?”,there are two ways one can enjoy condo living: Either buy or rent one. Buying comes with a risk, though, as condominiums are exceptionally prone to volatility at the downward changes in the market place.

The main reason lies in condo unit owners’ varying financial strengths. As the economy turns for the worse, the financially weaker unit owners often default on their monthly maintenance and special assessment fees. As a result, many lose their units through liens and/or other forced sales. If the market place cannot easily absorb such vacant units, the financial burden of carrying on for the whole complex falls on the shoulders of the remaining owners. This translates into higher maintenance fees and special assessments. This scenario precipitated the last major housing crisis of 2006.

If you happen to have deep pockets and don’t care much about those possibilities, I guess you can buy into a condo unit, but keep in mind that your investment may not be 100% secure in the future. On the other hand, if you aren’t the one likely to risk moneys on condos, especially moneys you realized from the sale of your house, you may consider the following viable option.

Don’t sell your house. Rent it out, preferably to your close relatives or to somebody else you can trust to take good care of it. If you don’t have such relatives or friends, rent it out on the open market. Carefully screen potential tenants by checking their length of employment, getting proof of their tax returns or assessments to make sure they can afford the rent. Obtain their credit reports to check for possible judgments, or heavy debt load. If everything checks out well, also apply for rental insurance. This will further add to your piece of mind.

You can then embark to look around for a suitable condo unit you wish to rent. The rental income from your house should be sufficient to pay for the rent of your chosen condo. That way you position yourself to enjoy the condo amenities to the fullest as if you owned the unit, but without worry about what may happen in case of unexpected special assessments and the possible loss of the condo unit’s value in the future. As a bonus, you get the added flexibility of moving to another condo unit after the end of the lease, if you wish not to remain in the same unit.

Also, think of the time that will come around where you have to pass your assets on to your heirs. They’ll be much better off with a house sitting on a regular sized lot, than with a condo that, when eventually divided among all its unit owners in the distant future, would leave them a small, almost negligible piece of land in comparison to your house lot.