Ask an Agent: What Are the Pros and Cons of a Self-Managed Condo Building?

• October 7, 2009

by Mark Wellborn

In this week’s installment of Ask An Agent, a reader wonders about the pros and cons of buying a unit in a self-managed condo building. Keller Williams’ Jason Martin offers up some insight.

Question: I am considering purchasing a condo in a small building (less than 10 units). The building is currently self-managed. Should this concern me? What are the pros and cons to living in a self-managed building versus one that is managed professionally?

Answer: This is a very good question, but is one that has to be answered on a case by case basis. The building is likely managing itself in an attempt to save on management fees. This should not concern you if the condo board is well organized and has a proven track record.  In order to find out if this is the case, you should review the condo documents and find the operating budget as well as the current reserve amount. If the numbers seem to be reasonable and the reserve account is growing, then you should be fine. On the flip side, you must understand that self management is very time consuming and if you have a board that takes the task lightly, the overall quality of the building will likely suffer. Managing a building that has fewer than 10 units can still be very burdensome unless the members of the association fully understand the task at hand.

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6 Comments

1. maria said at 10:06 am on Wednesday October 7, 2009:

   Good advice. Does anyone live in a self-managed building and have you run into any issues?

1. John said at 1:55 pm on Wednesday October 7, 2009:

   I’m condo president of a 4-unit self-managed building and I really can’t see any issues with managing a small building like ours.  The four owners communicate through e-mail, phone, and knocking on the door if needed.  The (small) condo fees are deposited monthly, bills are automagically paid via online setups, and extra funds are transfered into a reserve savings account with a decent interest rate.  Getting four personalities in tow to make decisions is certainly easier than 10, but you have to balance that with the condo fees (some of which are outrageous) that managed buildings are charging.  Some are upwards of $600/month—that’s like $100,000 added to your mortgage amount!

1. maria said at 2:19 pm on Wednesday October 7, 2009:

   John, are your monthly fees notably lower? Thanks for the first-hand insight.

1. Pat said at 12:34 pm on Thursday October 8, 2009:

   Beware!  I currently live in a four unit building that was mismanaged by the person who sold us our units.  His unit (the last that he couldn’t sell but rented out) went into forclosure after he ripped us off used our condo fees for his own personal legal bills instead of paying the bills for our building. We have placed a lien on that unit for back fees ($3,000+). I am now the condo president and I’ve hired a property manager for a nominal monthly fee but I swear it is another full time job for me. She has other clients so that means I have to take up slack where she can’t. The vice president/treasurer purchased another home so she no longer lives in the building.  On top of that we have unsavory neighbors that drive me insane in the unit under me(another long story). I plan on moving out of the building as soon as I can because I don’t have time to deal with the drama.  We are currently trying to replenish the reserves but it’s difficult because the property was neglected for several months before we found out what was going on and I’ve been working on getting the property back into shape - that takes money. Currently only three units are paying condo fees and we need fees from all four to generate a healthy reserve. I personally would rather pay $300-500 a month in condo fees versus the $188 I pay now if it meant no work for me and the building was clean, beautiful and well run.

1. John said at 2:20 pm on Thursday October 8, 2009:

   Maria—Ours is only $220/month and in the U Street/Col Hgts/14th Street Corridor, that is SUPER cheap.  Oh, and our by-laws are pretty strong for dealing with illegal actions and there is insurance for someone taking the money and running.  So read everything carefully and analyze the situation.

1. Robert said at 2:23 pm on Thursday October 8, 2009:

   I live in a building that is too large for self-management, but there are some issues that are relevant to any condo property.

   First, I sympathize with Pat. Over and over I hear stories that are similar to this. It is often suggested that a third-party financial management firm be engaged (to collect monies and pay bills).  If you to this route, make sure they have experience with buildings of your size.

   Second, if you are considering a self-managed condo make sure they have a good replacement reserve study and fund. This will give you an idea of whether big ticket items, such as the roof or the building wide tuck-pointing, are on the horizon and whether there are adequate funds for them or if you can expect a special assessment, which could easily hit $5K to $10k.

   My final thought is that if you have to ask the question “Self-managed or professionally-managed” about a particular condo, you should probably go with the professional management. Like the author said, if they have a good track record they will be proud of it and will be able to explain it to you clearly and succinctly. If there is any cause for doubt, that would be a big red flag.