10 Tips for Buying a Home in a Gated Community
Carefully consider the rules and management before purchasing a home in a gated community.
Talk to other owners about how the community is managed and maintained.(Getty Images)
After dreaming about living abroad for years, some retirees can finally afford to buy the perfect house in a beautiful gated community in an overseas paradise. Perhaps you're ready to sign on the dotted line, hand over the cash and move in. Not so fast. Your dream home could become your worst nightmare. By paying attention to these 10 points, you can avoid finding yourself the less-than-proud owner of a home that is not what you thought it would be.
1. The condominium regime. Perhaps your dream home is in a private gated community where visitors are restricted. If so, then it's probably a legally formed condominium. In Mexico, for example, condominium communities are allowed to have gates that restrict who comes and goes.
If you like the gate restriction, then make sure you ask to see the legal paperwork that initially formed your community as a condominium. This is a publicly registered document, and the administrator or developer should have a copy available. If not, your community might find the municipality's director of urban development sending out officials who will require your gate to remain open to the public.
2. Look for permits, permissions and paperwork. Have the developer or administrator show you the legal documentation that was involved in setting up your community. The paper might be in a foreign language and could be difficult to understand. However, simply knowing that your developer or administrator has the paperwork readily available is an important sign. You want the running of your community to be transparent, organized and efficient. Having such documents on hand is a good indicator that this is the case.
3. Check the balance sheet. Ask to see the latest balance sheet for the community. What you want to know are the latest figures on delinquencies by owners and the community and how the accepted budget compares with actual expenses. A financially distressed community is dangerous.
4. See what's in the reserve fund. Ask how much is in the reserve account. That is important because you want to make sure the community has enough held in reserve to be able to afford major repairs or purchases. When the well runs dry or the wireless internet or swimming pool pump breaks, you want your community to be able to have it fixed immediately.
5. Look for outstanding lawsuits. Check to see if there are currently any lawsuits involving the developer, administrator or the community itself. Look not only in the country where the community is located, but also in the home country of the developer or administrator. If there are legal actions, you need to find out why the suit was filed and what the disposition was.
Obviously, suits from owners filing claims involving your community need to be investigated. You don't want to be the next one at the table. And don't ignore claims involving the developer or administrator outside your particular community. They can give you indications of how business is conducted.
6. Have a look at the common areas. Check how the common areas look. Make sure the roads are in good repair, the pool is not moldy, the street signs are legible, the landscaping is well tended and the furnishings have been updated. The entrance to your community, in particular, is the face to the outside world. The individual homes may look great, but if the common areas don't, something is amiss. Find out why.
7. Check out the security plan. Determine whether there are modern cameras, security patrols and the gate protocol for visitors and workers. If anybody can get in by just asking, you might as well not have a gate. Ask to see a written security protocol. Also inquire about crime statistics for your community. If the local populace sees your community as easy pickings, theft will be hard to deter. Security requirements differ among countries, regions and communities. Look for what you believe to be appropriate.
8. Analyze the homeowner association dues. Review a breakdown of fees that you are expected to pay. Ask if you can pay monthly or if it must be yearly. Determine how convenient it is to make payments, including whether you can make a bank transfer, pay with your home currency and pay online. Find out how often fees have been raised, the expectation for future increases and whether there have been any special assessments. Some of these are convenience items, but they all give you insight into how the community is run.
9. Look into the rules and bylaws. Carefully read the HOA rules and regulations that you will be legally obligated to follow. Make sure you agree with them. Changing bylaws can be an arduous task that often requires unanimous approval by all owners. Don't think that once you become an owner you'll be able to convince people to change things you don't like.
One particular point to check is whether the community's bylaws restrict or prohibit rentals. Even if you aren't planning to rent out your place when you're not using it in the near term, your situation could change and the time may come when you'd like to be able to make some extra income this way.
10. Talk to the owners. Question as many owners as possible about how the community is run. For example, it is typical across Mexico for condominiums to be managed by an outside administrator who is supervised by a vigilance committee made up of owners. By and large, your satisfaction with daily life in your community is going to be heavily influenced by how well the community is run.
Find out if there is any owner dissatisfaction or unrest with the vigilance committee, the administrator, the developer or among owners. Things can get ugly, so make sure your dream community is full of and run by people who share your core beliefs. You don't want everyone to be the same, but it's no fun if you disagree on fundamentals. Remember, the policies that affect your daily life will be determined by the majority of owners and carried out by the administrator and VC.
Taking the time to address these issues could potentially save you from making a terrible mistake. Remember that the salesperson and developer want you to buy, so you aren't likely to get the straight story from them. Do your research, ask questions and observe. It can be the difference between living your dream and dreaming of somewhere else.
Kathleen Peddicord is the founder of the Live and Invest Overseas publishing group.