Beginner investors often find that condos offer an attractive option as an entry level real estate investment. And given the right environment, they can make an excellent investment.

There pros and cons of condo ownership and they, like all properties, should be carefully examined. You share ownershipcondos and lawyers and responsibility with the common areas such as sidewalks and swimming pools but the property you own solely is the interior space of your unit.

There are also specific guidelines that property owners and tenants must abide by and these rules are spelled out in the condo association’s CC&Rs, or Covenants, Conditions and Restrictions. Most rules are boilerplate and are there to protect property values and property owners but some associations get a bit overzealous and restrict such things as how many guests you can have or how many patio chairs you can place on your deck. Even the color of your front door or drapes visible from the street might be regulated. You have the right to review the CC&Rs before you make an offer. But you need to look beyond just the CC&Rs—look for an overly litigious association.

When financing a condo, if there is any existing or pending litigation, lenders will not finance the transaction until the lawsuit is cleared. Why? Paying lawyers can get expensive and that can mean the property owners must pay extra for an attorney, referred to as a “special assessment.” The special assessment can be small or large but the problem is the lender doesn’t know what the assessment will be and if it will affect the borrower’s ability to make the mortgage payment. If the lawsuit lingers, it can mean even more money out of a property owner’s pocket.

When looking at a condo, look at your price, cash flow, CC&Rs and litigation. It’s the lawsuits that borrowers rarely explore only to find out later the deal can’t close.