Three Big Positive Financial Factors of Owning a New Orleans Condo that Buyers Should Remember….It all Adds Up…
What will the NOLA Condo Market be like in 3 to 4 years ?
People who buy condos tend to move more often than home buyers for a variety of reasons. People out grow their condos, get better jobs, graduate from school and have to move to another location. Many will buy a condo because they know they will be here for a shorter time and buying a condo makes more sense. I am often asked what the market will be like in 3-4 years and will I make money if I buy now rather than rent. I can only tell them the present trends. I would only be guessing as to what the market will look like in the future. I can give buyers and sellers a view of the past and the present market trends for condos.
One thing I can tell them is that may not have factored into the purchase equation is the financial benefits of owning for several years. You may or may not have appreciation on the sales price but you will get two other large financial benefits. At the low rates that we currently have, the “plus” factors are even better. Lets use $200,00 as a loan amount to see how it works. Lets use a $250,000 sales price.
Paying down the Principal
Your monthly note is broken down into several large numbers once you take out taxes and the HO6 Insurance policy. Over a four-year period you will pay down the principal by $13,819.64 at a 4.5% rate. That is an average of $287.97 per month that you are decreasing the amount you owe. When you sell, you will get this back as equity that has built up over time.
You can get lower rates if you finance for 5 years or 7 years amortized over 30 years. You just have to pay off the mortgage in 5 or 7 years. The pay down of principal increases monthly. Going from 263.37 in month One to $314.03 in month 48.
The Mortgage Interest Deduction
The interest you pay over the 48 months is $34,819.12. This is the cost to borrow the money. As a home owner you get to deduct the interest you pay on your taxes. If you are in the 25% tax bracket your deduction is 25% of $34,819.12 or $8407.78. This how much you save on taxes over the 48 months. You save $8407.78. The out-of-pocket expense is thus lowered by an average of 181.35 per month over the 4 years.
The Appreciation Factor
This is what we do not know because we cannot see the future. Lets just say if the property appreciates by 5% over the 4 years. This is big money. This has done this in the past and could do it in the future. Last year alone you condo could have easily appreciated 10%. This figure is based on the sales price. Let say you paid $250,000. The 5% increase would put you at an increase of $12,500 over the 4 years. This number is not certain. Over the last 10 years we have seen 6 years of appreciation and 4 down or stable years. The down years were 2008-2009. The even years were 2010 and 2011.
Adding the Number Up
Paying down the principal and getting the Mortgage Interest deduction is a given and are known factors. If you get the 5% appreciation then it really adds up in your favor. That all adds up to……
$34,727.42 Versus ($72,000) in Rent
That adds up to almost a thousand dollars per month. You will have expenses as well but you can easily pay $1500 per month or $72,000 in rent over the 4 year period. You never see this again. This is an especially valuable set of number of you are a student, medical student or resident when you know how long your stay in New Orleans is going to be…..
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What is covered in Condo Fees ?…Most often asked Question that I hear when selling condos in New Orleans..
February 27th, 2014 Categories: Condo Knowledge
The number one question that I am asked is what is covered in your condo Dues and how are they figured out….Let me answer those questions for the New Orleans Condo Market….
The condo fees differ by the condo association but there are the basic items that are the same for all condo associations. The casuality, fire, wind-hail and flood are almost always covered in the monthly fee. This is generally the largest share of the budget. The upkeep of the building and common areas are the next largest budget item as this is a shared expense by the owners. Once you get past these two main expenses you will begin to see differences. The common expenses are almost always based on the square footage of the individual unit. A 1000 sq. ft. condo will pay twice as much as a 500 sq. ft. condo in the same complex. The share % will be in the condo documents.
The HO6 Policy covers your possession and build outs with the walls…..
You are always responsible for things that break inside or get damaged within your condo. You use it and you keep it up as this is not common. You should always have a HO6 policy for you possessions and build outs within the condo. Often called “sheet rock in”. These are not expensive and lenders will require buyers to purchase these polices. Everyone should have one. The condo associations have high deductibles on their insurance policies and you may need to use these. My experience says this is a must have policy.
The most likely damages that I have seen come from water leaks from the roof, broken pipes, water intrusion of various kinds. The unit above you make have a toilet or tub overflow. All kinds of things can happen and you want to be protected. Most of the time these policies give you a fix within days and take care of you no matter what the fault is. These policies have lower deductibles that the large policies that cover the building and common elements.
The things that are common to all units share the common expenses. The sharing items in common areas can include lights, electricity,water, common area cleaning, trash, management, pools, gardens, termite contracts, gyms, elevators, security gates, parking areas and any common personnel on the payroll are covered in the fees. These fees will vary from condo association to condo association. A small condo association will generally be managed by the residents and have no personnel on staff.
The larger associations that want on site management, security, and full-time maintainance personnel will of course cost more but the share is split between many owners. Personnel on staff is one of the larger drivers in driving up the cost of managing a condo. It all depends on what the owners want and need.
What the owners want are covered in monthly condo fees is voted on by the owners and the majority wins. This can change over time as the owners may want new services or may want to delete some items that they no longer need.
The large condo associations generally have water, trash and sewerage cost in their fees. Many of the small associations that had individual water meters and gas meters before a conversion have each owner pay their own as the meters were already there. This will vary but the size of the complex will often dictate this.
Sometimes you will see the condo fee cover everyone’s electricity. This is not the norm and it really makes the fees go up quickly. This makes it expensive if you are using this for a second home and are not a full-time resident. This becomes a drawback when selling your condo as the fees get higher.
Condo Reserve Funds – Always needed
The Collection of Condo Reserves are a monthly expense. This is where the condo association collects a certain each month to hold in reserve for unexpected expenses. This is a buffer from rising cost and things that need to be replaced. This generally runs no more than 10% fo the monthly fee. Lenders want to see at least 10% of the annual budget in reserve. This can fund updates , major repairs and large deductibles in the insurance policies. Not having enough in reserve means when you come up short there will have to be an assessment on each owner to cover damages or replacements…
Many condo associations have new owners put several months of condo fees into the reserve fund. This is not pre-payment of fees but goes in the reserve fund like a rainy day fund. This will be in the condo docs or added as an amendment. The management company will know if this is the case in their association. This tends to happen in the larger complexes. Always ask how much the reserve fund has in it as this may be an indication of future liability.
Now For some Uncommon Shared Expenses
1107 S. Peters or The Federal Fibre Mills has a common chiller system that is the air conditioning for all the buildings. It is a very efficient system but does make the condo fees go up and your electric bill go way down. The expenses of a system is thus shared. In most associations the a/c is on you along with the upkeep of your equipment.
700 South Peters has 24 hour security and a valet parking person during peak hours of the day. 24 hour security does add up but that is what some association want.
3915 St. Charles Ave or St. Charles Gardens has a part-time manager who is on site at certain times during the week. The association hired the manager to manage the condo association but did not need one full-time.
920 Poeyfarre or the Cotton Mill Condos has a central boiler system for hot water that all the units feed off of. This is a shared expense and the owners do not have to keep up their individual water heaters. There are none.
It does seem like a lot to remember so do not be afraid to ask questions. I do this daily and still have to ask as policies do change. I always suggest the buyers ask for the current budget so they can review each line item to get an idea of all the expenses that they will be paying in their monthly fees.
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February 11th, 2014 Categories: Second Homes
The New Orleans Condo Market is very strong and would be even stronger if there were a larger supply of condos to sell. I see this in all areas of New Orleans where people are looking for condos. The homes are selling quickly and are rising in price, and condos are following in their footsteps. This is not the case in the Jefferson Parish Market where sales are still slow and prices are not rising.
One of the big reasons for this is the demand for second homes in the City Of New Orleans. The “Baby Boomers” want to enjoy what New Orleans has to offer. There is always something going on. It’s a compact city where you do not need a car, and walking can be fun. Many of these buyers are cash buyers, or they put large sums as a down payment.
Another interesting note is that many live in nearby cities and towns such as Baton Rouge, Lafayette, Houma, Mandeville, Slidell, Kenner and even Metairie. I still see clients from Houston and points farther away, but the vast majority are close by. Many of the out-of-town buyers are helping their kids who live here. Their kids may be students or young adults getting started in their first jobs. The plan is for their condo purchase to become a second home once the kids finish school or move on.
I am seeing clients who plan to use the home more than just for a vacation home. They plan to live here part-time for months at a time. This is a new trend that has just surfaced in the last two years. They are also becoming more flexible in where they want to buy the condo as well. Most of the buyers have some connection with New Orleans but are not familiar with all the neighborhoods and choices that are available to them.
That is where “Eric’s Real Estate Tour” comes in! We can tour all of the areas. Many times this opens the buyer’s eyes as to what the different areas do have to offer. By selling all over the city I can generally answer most of their questions about the choices before them…
French Quarter Condos
Many clients only know about the French Quarter and will start their search there. They will sometimes opt for other areas where prices are cheaper and you just get more for your money. Many are looking for two bedrooms so that they can have friends visit. The French Quarter may be just too expensive. Some will stick with it until they find the right one.
Warehouse District Condos
The demand has been strong in the Warehouse District for almost a year. There is little supply, and the buyer has to be motivated to buy when something becomes available. The buyers love coming to the Saints’ games and Mardi Gras, so this is a perfect place for many. Parking generally is not an issue in this neighborhood. The area has gotten more expensive so I suggest looking in the adjacent areas of the Lower Garden District, Garden District and Uptown.
Lower Garden District & Garden District
The area between Magazine Street and St. Charles Ave has a lot to offer. Once clients see this, they become open to the area as an alternative choice. Many will start out in that area if they come to New Orleans more often. They know all the wonderful things living just off of St. Charles has to offer. Many of the condos off of St. Charles tend to be smaller complexes while St. Charles Ave has larger complexes that were apartment buildings at one time.
Uptown New Orleans
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When most people begin their New Orleans search they have an fairly good idea of what they will like or dislike. For the second home buyer they will generally say give me the historic look first. Buyers looking for a condo as a primary residence may still want the same things but is willing at all options that are availaible.
Outside of the Warehouse District you will find the more historic condos to be smaller associations that were once grand home turned into appartments years ago. Then turned into condos in the last 10-12 years. They will have the high ceilings, wood floors and the historic feel. Most will not have amenties such as a pool and many will not have gated or covered parking. Its about 50/50 with parking. A Lot of these are what I call neighborhood condos as they are in neighborhoods.
Some few will be large units that are quite elegant like the one condo of 5 units that is on St. Charles Avenue. These are like living in a house and of course much more expensive depending upon the updates of the condo itself.
Another common conversion in Uptown is the old 1920′s apartment houses on St. Charles Ave. and nearby main streets. These will mainly be smaller one bedroom condo units over 3 floors at most. Many will have parking beneath or behind the building. They have a great feel but are not going to be large. A great size for weekend place or student who needs a place to live.
The larger 1970′s complex with amenties and services will be larger units that will have parking, gyms, pools, courtyards and such things. They will generally be managed by a local management company. Most will be very secure and in great areas right on the St. Charles Ave. Streetcar line. Most will not have that historic feel but other things to make up for the lack of that feel.
In the end its all about what you will like and enjoy. I have the knowledge of most of the condo associations so can guide you once I hae a good idea about what your criteria is. I am happy to give you the positive and negative of each….
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New Orleans Warehouse District Condo Market Lacks Inventory as We Enter Feb. 2014, Why is the Question?
The New Orleans Warehouse District has few condos for sale. It is really strange that there are only 12 active listing in the area. There are 7 units below 400k for sale and 5 condos above the 400k range. Out of the 12 condos for sale, I know at least half of them are just asking too much. Prices were up an easy 10% in 2013 but some are easily 20% overpriced.
In the last 5 years the majority of my sales came form condo sales in the Warehouse District. Now we have to work other areas that offer more properties at more reasonable prices.
Why are there fewer listing? I am guessing with interest rates below 4% where a lot of recent sales were bought at and a great rental market, many owers can rent at a profit. Many think pprices are still going to go up. That may or not be the case. Another reason is that no new units built in the last 5-6 years. The 425 Notre Dame is being built right now and most of those are over 600k.
There are plenty of new rental conversions. There is historic tax credits availaible to developers for rentals that mature in 5 years and its worth millions to them. They will not convert early if the rents remain high and they can cash in on the Federal and State Historic Tax Credits.
There is the extra demand for second homes in the area. This also puts upward pressure on prices which was not as big several years ago. Many of the second homers are Baby Boomers and people who have business in New Orleans on a regular basis.
Once clients see that the supply is very limited, many will look in other areas where the prices are better and there is a lot to do. The Lower Garden District is getting much of the over flow as are condos on St. Charles Ave. Many however just want the Warehouse District so there is always a demand for places that are priced right. You See it, You Like it, You had better act quickly….
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A New Year and a New Market in Real Estate. Since the concentration of this blog is about condos I will give you an overview of the market in Condos. The French Quarter, Warehouse District and Uptown are aall doing well. The market is Jefferson Parish is still not doing well. The rental market is very strong. The strong rental market is making people in Jefferson to take condos off the market and rent them. The Owners in Orleans can easily rent ot cover their cost and watch their values go up. This is one of the reasons I think there is little inventory on the market today.
The low interest rates have made for low notes. Tis will also make it harder to part with your condo to move to a higher note. The interest rates are trending up and the best this week was 4.5% for one of my clients. You can expect the rates to rise over the year. There are however more lenders locally competiting for your business for their own portfolios. You pay 1% for the money and make almost 5% wiith higher fees. No wonder they want your business.
The Second Home is still very strong with a lot of cash buyers and those willing to put down high percentages above the normal 20% downpayment. The one thing that is different this year is that many second home buyers expect to live here part of the year and make it a part time home. You see a lot of baby boomers in this category. New Is just a lot of fun and that is how they want to spend their time.
We are also seeing more second home buyers in the market that do not live that far away. Baton Rouge comes to my mine first. Its 70 miles up the road and makes it an easy weekend visit. They also tend to know more about New Orleans and where areas they want to be in. This is kind of a new trend but after selling 4-5 people from Baton Rouge lately I see the trend. You also have people from Kenner, Mandeville, and Slidell which are een closer places.
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We are seeing a strong market in New Orleans Real Estate for second homes. The demand has been there all year but the amount of sales is down because the supply is just not there. When something does come up it tends to sell quick if it is priced correctly and is nice. This has been especially ture in the French Quarter and Warehouse District. I now see this trend spreading to other areas.
It spreads to other areas because ther is just not a lot to view when you limit your selections to specific areas and price ranges. For people purchasing from out of town it is even harder because what is here on one trip will be gone the next month. I have had several clients who will drive in when something does come up. They are eager to purchase. Others are eager but just cannot come into ton on a short notice and will miss out on the better deals.
It also happens to the people who live here and want to wait for the weekend. This is good for the sellers if they have something nice and its priced right. Some sellers see the tight market as a chance to get more than their condo is worth. There are many of these in the market and once those are taken out its easy to get to the best 2-3 choices quickly. When a seller is over 10% of the market price the condo will sit there until it gets reduced and they fall within the market price. Many times it takes a while for this to happen.
This week I got a new client and we narrowed to choices to about 8 units. They reviewed the photos and the areas and were quicky down to five units. They had a dog so that knocked one condo complex out that does not not allow dogs. Once we started looking, they did not want a 70′s feel apartment even in the best neighborhoods on St. Charles Ave. That knocked out two more selections. That left us with two selections.
One was a little overpriced and the condo association has not done a good job at keeping the place clean and pretty. The other one had a well maintained common area and overall great job at maintaince. I mentioned that these condos have always shown nice as I have shown in there over the last 5 years. The condo association and the level of maintaince and how the areas are keep clean do matter a lot. My clients made a nice offer on the nicer association. Thats kinda how it works…..You see It You like it, Then you better put in an offer……
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You can be in the absoute center of all the activity in the French Quarter location. Very few French Quarter condos can match this location,
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The Roosevelt Hotel was first opened in 1893 and was known as the ” The Grunewald”. It was not named the Roosevelt until 1923 and was named after President Teddy Roosevelt. The Hotel now has 504 rooms. It is located a block off Canal Street at 123 Barone Street.
“When it was the Grunewald Hotel it hosted “The Cave”, considered by some the first nightclub in the United States. It featured waterfalls, stalactites, and chorus girls dancing to Dixieland jazz. As the Roosevelt, a new night club, “The Blue Room”, was opened and was long a well known venue of nationally touring musical acts.”
I know it as a great place to visit during the Christmas holidays as they put so much in the decorations and lights. It has changed over the years and most of us oldies remember all the angel hair floss. Decorations move on and I think the present day decor is great. Its a must see when you visit New Orleans during the Christmas Holidays.
Its so cool that I am organizing a hotel tour before Christmas where we walk to 4-5 hotels to view their decorations and of course stop for a drink at each along the way. Its such a great value and you get a lot of walking and talking in between stops and drinks…..Photos will b allowed along the way….
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Many purchasers tend to look way too much at the price per square foot when looking at pricing. It is a factor but there are many more factors and the Condos in the French Quarter have a lot things to look at in addition the the size. In the end the price is determined by what you are getting for your money and what you will pay for it. Sellers like to look at those numbers if it makes their unit more valuable. Its just the nature of how people look at their own units.
There are so many variables that is often times easy to pay too much. Also the buyer may not realize the value if all the facors are not taken into account.
1. The quality of the condo assoication does matter. Has the condo association been kept up. Is it kept clean. Is there unfinished or unmaintained look. Are things being put off for future owners to pay. Does the condo assoication have enough in reserves to take care of future issues without an increase in condo fees. If the complex is kept up to a high standard then the price will stand up. The management of the condo assoication does matter as well. Most small associations are self managed.
2. The size and quality of the common areas do matter. This is an extension of the condo itself. In an area where units are small having that nicely landscaped courtyard with furniture with pol are fountain are part of the enjoyment of having a second home. Its something that you own and its for your enjoyment and in the end value.
3. Location within the Quarter matters with condo between Royal and Decatur generally selling for more. Its just where more people want to be. This however is nice for people liking the more residential areas of the French Quarter as you get more for your money and the areas are great. Its just that perception that people have. What do you see, feel or smell when you walk out the front door.
4. Location within the complex is important. The 3rd floor walkups generally get less that a second floor unit with all else being equal. Stairs and views do matter as a lot of these are like an attic space. A unit that opens onto a nice courtyard with french doors is more desirable than one that opens to an alley.
5. Views are super important. Is it a view of an alley or a street view or that of a beautiful courtyard. This is where the amount of natural light can really help sell a place coming through French doors or larger windows.
6. The condition of the condo itself does matter. Newly renovated units to the studs can be worth as much as 20% more. You just get less problems and are able to enjoy without doing work on it. Now if you get a big break on price then it may be worth it. These are few and far between. So updates do matter and are more desirable when you go to sell.
7. Balconies and Galleries are big. A second floor balcony is among the most desirable feature of a French Quarter second home and can easily add 20-40k to the value of the unit. A gallery is wider as it is supported to the street and can generally be a much more usable space. By having a balcony to the street you naturally get a much better view of the scenery. The photo below is a gallery as you can see the supports to the street and that it is wider than most balconies. Private patios can really be a plus as it just adds to the usuable space.
8. Parking is a biggie but most units do not have parking. It can easily be worth 40k if you can find one. Some places will have nearby parking but others may not. This will become a factor to at least half the purchasers but any of the buyers will not have a car so it is a mute point to them.
9. High Ceiling and an open floor plan are going to increase value as you jut get a larger feel. A single story is going to give you a larger feel because the space is on one level. It just lives larger. This is not always the case but is a general statement. Spiral staircases are not the perferred way to go. Historic feels get the nod from the 70′s look. Most buyers want that New Orleans feel….
10. The kitchens and baths are the key things people do look at just like in homes. Do you get your own washer and dryer or is ther one close by to the unit. Remember paint is cheap and sellers should clean and paint before putting the units on the market. Light fixtures give the condo an elegant look as well. Wall paper is an easy fix and buyers can get a wall paper discount.
These are some of the points well worth thinking about because all this does matter when you go to sell. You get more if you have more to offer. Your value goes up when you keep all these facors in mind. The condo are all so different and that is where a well rounded and knowlegable agent can help you in getting the best value…
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