In a slow housing market, you can't count on quick appreciation. You're more likely to recoup your money if you don't move for at least five years. You'll also get a better deal if you follow these steps when buying a condo:
— Look for highly motivated sellers. If you've ruled out older buildings, look for builders' closeout deals — especially from nonlocal builders ready to move on to greener pastures — and newer resales, where you might find a seller who bought fairly recently but must move.
— Be wary of unfinished projects. As developers adjust to the market, some have delayed construction, downsized units, reduced amenities or pulled the plug altogether. Most developers return deposits, but in Florida, some buyers are suing to get their money back because of a builder's failed promises.
— Educate yourself about your market. Check the Web sites of your area's multiple listing service, office of economic development, real estate agents and condo developments. Ads on Craigslist (www.craigslist.org) offer an overview of what's available. Attend open houses and developer tours.
— Think twice about amenities and upgrades. The more amenities in the building, the higher the condo fees. Upgrades will raise your cost but not necessarily your return when you sell.
— Be choosy with incentives. Motivated sellers may offer to pay a year's worth of condo-association fees. But if they will do that, they could cut the price — a longer-term win. If you accept incentives, be sure that they add value to your deal. Developers may offer cash or a cruise in exchange for working with affiliated lenders and paying an extra one-fourth to one-half percentage point on your rate. Cash might help with your closing or move-in costs, but it's not worth paying for a cruise over the life of the loan.
— Look at the comparables. Ask your agent for a list of all the units that have sold since the building was constructed, including the listing and sales prices.
— Avoid investor-dominated addresses. You want fellow owners who, like you, must live with the consequences of shared decision-making. Plus, speculators are more likely to end up in foreclosure — a nightmare for owner-occupants, who must make up any shortfall in funds to pay the building's bills.
Ask a building's condo board or management company how many units are currently in foreclosure, then decide how much risk you can live with.
Patricia Mertz Esswein is an associate editor at Kiplinger's Personal Finance magazine. Send your questions and comments to moneypower@kiplinger.com.