Why Old Condo Rules
Have Lost Their Value

Question: I am a single, 31-year-old woman interested in purchasing my first home. I am seriously considering a condo/townhome, but I would like to find the best selling areas in my city for such properties before I take the plunge. How can I determine which areas have seen the biggest appreciation in value for condos/townhomes?

-- Patricia, Los Angeles

Patricia: You have probably heard that condos/townhomes are difficult to sell and don't appreciate much in value, so you want to buy one in an area where selling will be easier and price appreciation more likely, when you do eventually decide to move.

This used to be a good strategy. Indeed, up until quite recently, condos/townhomes were the last to appreciate in boom times and the first to go down in bust cycles. But this has apparently changed in California -- particularly in the Los Angeles market. Today, condos/townhomes just might be the very best investment.

The reason is that there are so few new ones being built. Statistics I have seen suggest that only around 2,000 new units were constructed in 2002. The reason is builder's liability. Homeowner lawsuits during the first 10 years after construction have become so common that builders simply don't want the risk associated with selling condos/townhomes -- and most have gotten out of the market.

For many people, condos/townhomes provide a very desirable lifestyle: neighborhood control; amenities such as pools, spas and recreation centers; someone else to handle exterior maintenance; and lower prices because the units tend to be smaller than comparable single-family homes. As a result, prices of condos/townhomes in your area have appreciated faster, in many cases, than detached homes on a square-foot basis. All of this indicates that they may be the best-kept secret in real estate.

You ask where to buy and I can only suggest that you look to strong residential areas. Condos/townhomes placed amid single-family homes in highly desirable neighborhoods should prove to be the best investments. Be sure to look for units that are more than 10 years old and check for any lawsuits that are pending. For other concerns when buying, check out my book, "Tips & Traps When Buying a Condo, Co-Op or Townhouse" (McGraw-Hill, 1999).

-- Mr. Irwin has more than 25 years' experience as a Los Angeles-area real-estate broker. He is the author of more than two dozen books about real estate and is recognized as one of the most knowledgeable writers in the real-estate field. Mr. Irwin's most recent books are "How to Get Started in Real Estate Investing" and "How to Buy a Home When You Can't Afford It" (McGraw-Hill, 2002).

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