A Wisconsin-based financial planner said rising interest rates might make condominiums seem like an attractive purchase, but that it’s important to consider their significant down sides.
A caller to Tuesday’s “On Your Money” program named Tom said that his daughter -- a first-time buyer -- made an offer on a single-family home this summer, but was outbid. Now, he said a friend is helping her look at a condo and Tom is concerned about some of the potential drawbacks that he’s heard about that type of investment.
“If it’s the right place and you want to be in a specific area and there aren’t a lot of single-family homes, obviously, you have to go with a condo,” said financial planner Kevin McKinley, of McKinley Money, in Eau Claire.
However, McKinley agrees that condos present a number of negatives of homeownership and only few positives.
“You’re sharing walls, you’re sharing space, and worst of all, you’re sharing expenses for the building,” said McKinley. Furthermore, he said owners are stuck with condo fees over which they have no control and they can't negotiate services, including shoveling the driveway or maintaining the lawn. McKinley said these factors make selling a condo difficult, and owners likely won’t make much money -- if any -- on the sale.
McKinley said if she has her heart set on a single-family home or an individual home, it’s better to wait.
“As interest rates rise, housing prices fall,” said McKinley. “The more interest rates rise, the better it is for her for actually buying the house because she can probably get a better price if she waits six months or a year.”
Editor's Note: "On Your Money" can be heard each Tuesday at 8 a.m. on the Ideas Network. Email personal finance questions to onyourmoney@wpr.org.
