[xpl0sive]

Here's another thing to think about when buying a condo... special assessments from your strata... here's a real life example of some people I worked with...

They have a 822 sq ft condo in a building which was built in 1988 and is located in Kits. Their assessment value on the unit is currently at $399,000. They purchased the unit back in 2010-2011 for $429,000 which was considered a "good" deal at the time. They put down as much as they could afford, which was 10% or $45,000 at the time.
So here they are, with a $385,000 mortgage, paying $1,800/month for "owning" a condo. They could have easily rented the exact same unit for about $1,500 but decided to buy because they didn't want to pay someone else's mortgage.... (sound familiar?)

Fast forward to 2014.

Here's what their current situation looks like

Year Total Paid Interest Paid Principal Paid Balance
Year 1 $21,926.40 $11,367.75 $10,558.65 $375,541.35
Year 2 $21,926.40 $11,048.63 $10,877.77 $364,663.58
Year 3 $21,926.40 $10,719.82 $11,206.58 $353,457.00

So now they've got a place, for which they owe $353,457.00. Current assessed value is $390,000. Someone in the building gets sick. They investigate. Found extensive mold damage in that person's unit. They call in a building envelope engineer. After a thorough investigation it is determined that the entire building envelope needs to be replaced. Cost of the repairs? $2,845,000. There are 60 units in the complex. Each unit gets their share of the repair bill, based on the square footage of their unit. These people's share is 2.04% or $58,038.00.

So, now they have a real issue on their hands. They owe $353,457.00 on their mortgage. They owe $58,038.00 to the strata. Current assessed value of the place is $390,000. They can't sell the place without paying off the special assessment. Even if they could sell it today for $429,000, less the special assessment ($58,038), less their mortgage($353,457), less realtor's fees($25,000), they would be in the negative $429,000-$436,495= -$7,495.
Now don't forget their initial down payment of $45,000 and $65,779.20 they've paid in payments over the last 3 years. That puts them in the MINUS by almost $120,000

Compare that to renting the SAME unit for $1,500/month for 3 years ($1,500 x 36) = $54,000
Interest they could have earned on the $43,000 down payment in a GUARANTEED fund 3% per year for 3 years = $3,870
Cost of renting, just over $50,000. And they would get to walk away from the unit and rent another place and not have to deal with the ongoing repairs.

Now would you rather be in the minus by $50,000 or by $120,000?

And this isn't a one-in-a-million situation like some may think. Leaky condos are all over Vancouver. Buying in a strata opens people up to all kinds of special assessments that could originate from a number of places, a roof that needs to be replaced, a building envelope issue, piping in the building needs to be done, etc.