Questions about condo boards

East Coast · Member since 2015 · 111 posts · 14 votes

Out of curiosity, I have been taking a look at the condo market in NYC for investment opportunities.
Condos are attractive because of their simplicity. They are not as profitable as multifamily, but there is a level of stability.
However, I hear a lot of stories about out of control condo boards where they increase the common charges and they approve expensive
building projects. The boards are able to do as they please without the approval of the residents.

Is there any truth to that or is every condo board different?

How does an investor avoid a board that is out of control?

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Theresa HarrisPro Member

Member since 2019 · 15k+ posts · 11k+ votes

Condo boards can't increase fees or do special assessments without approval of the condo association. Bylaws will differ as to what percent of the vote has to approve the changes. There are condos where they are poorly run and others that are well run. You can also run to be on the condo board

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Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
3y
Condo boards can't increase fees or do special assessments without approval of the condo association. Bylaws will differ as to what percent of the vote has to approve the changes. There are condos where they are poorly run and others that are well run. You can also run to be on the condo board
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Freeman Schultz
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East Coast · Member since 2015 · 111 posts · 14 votes
3y
Quote from @Theresa Harris:

Condo boards can't increase fees or do special assessments without approval of the condo association. Bylaws will differ as to what percent of the vote has to approve the changes. There are condos where they are poorly run and others that are well run. You can also run to be on the condo board

Thank you for your response. I assume when you mean condo association, you are referring to the owners of the units?

I guess I would need to look at records of the condo board to see if they followed their bylaws in regards and got the the approval to increase fees and special assessments.
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Vessi Kapoulian
Investor · Los Angeles, CA · Member since 2020 · 101 posts · 94 votes
3y
Review the Bylaws, CC&Rs, Financials, Budgets, House Rules, Reserve Studies, and Meeting Minutes to gain insight into their financial position and board/culture dynamics. That should help you determine how you want to proceed.
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Kuriakos Mellos
Member since 2020 · 132 posts · 90 votes
3y
Condo boards can be a pain in the … in most cases. Many are very anti rental units in their buildings, so I would make sure and diligently double check to see what rental regulations are like. I had a friend that was buying a condo that had no rental restrictions, and the board got nervous with them buying the unit. They held a series of meetings and updated the by laws by the time they closed disallowing rentals! Also - special assessments can eat into profits (was hit with one on one of mine.). That being said - if you truly find a investor friendly building (and they do exist ) - it can work out great. I do like not dealing with as many maintenance issues, Lanscaping, snow plowing and so on - but I also don’t want to be screamed at for touching up paint on the trim of an exterior door with a shade of white that was not apparently board approved. (Yes - that did happen 🙃)
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Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
3y
Quote from @Freeman Schultz:

Quote from @Theresa Harris:

Condo boards can't increase fees or do special assessments without approval of the condo association. Bylaws will differ as to what percent of the vote has to approve the changes. There are condos where they are poorly run and others that are well run. You can also run to be on the condo board

Thank you for your response. I assume when you mean condo association, you are referring to the owners of the units?

I guess I would need to look at records of the condo board to see if they followed their bylaws in regards and got the the approval to increase fees and special assessments.

Sorry yes, the board. With any condo, you want to go through the documents carefully and your realtor should as well as they will be more familiar with things.
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Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
3y
@Freeman Schultz
Most boards are run by people with little property management experience and thus make a lot of mistakes Managaing a building even when a PM is involved
The best way to avoid this is to get on the board.
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Zach Oehlman
Investor · Nationwide · Member since 2019 · 30 posts · 37 votes
3y
My experience from running a large group of over 1,000 investors is....
Control the board or stay away.
Any time we loose control of an aspect of our business it increases the risk. Know the risk going into the deal is a determining factor and if you feel it is still a good deal that can change it.
For example, if you are getting a great deal on it then that could be a reason to move forward.
One thing I see very few people discuss is the opportunity cost of time / money when making a decision like this.
Whenever you are making a financial decision you always need to compare and contrast it with other options and then make the best risk adjusted decision.
Does it out perform other options?
Is it have less risk than other options?
Cheers to you and your future sucess my friend!
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Jeff S.
Specialist · Portland, OR · Member since 2010 · 3k+ posts · 1k+ votes
3y
@Freeman Schultz you cannot generalize boards as their by-laws dictate how things are to be run. Yes there are associations that the board has full authority with a majority of the board vote to increase dues and initiate projects, among other things. These days board members can be intimidated by legal threats by homeowners which can limit their ability to operate independently.
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Jason LeePro Member
Real Estate Agent · New York, NY · Member since 2015 · 401 posts · 235 votes
3y
Condos can be attractive because of the simplicity as you mentioned. Most of my landlord clients own condos. Most own just one or two but I have a good number that own many units. It's very easy for them because they don't really require any PM and if it's NYC it's mostly A/B+ class tenants.
You have to look at the bylaws, and before you purchase your attorney will get to read the board minutes and look at the financial statements. In general, I would be looking at larger buildings with many units, and low common charges and taxes for economies of scale. I would stay away from smaller buildings, even if they have tax abatements, because unexpected capex can be crippling among fewer owners, and smaller buildings can more easily fall out of Fannie Mae compliance.
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