Many people turn to investment properties for extra income. Why wouldn't you? Having others pay you rent each month on the properties you own is a great way to help cover your own mortgage or other expenses. Many will prefer buying condominium units because of their size- they are smaller and less expensive. Single-family homes can be costlier and more time consuming when it comes to maintenance. This means they're not as great of a choice for those just starting out buying investment properties.
For the most part, real estate is a profitable investment for short-term and long-term goals. Short-term, you can relatively quickly begin generating ongoing rental income. Long-term, if the value increases over time, you can gain additional equity. While investing in real estate often results in ongoing maintenance costs and a significant sum of cash upfront, it also provides passive income and assists in building wealth.
Condos are short for condominiums. They are individual units that are privately owned within a building with many other units. Typically found in high-rise buildings, they are similar to a hotel-style layout and are confused with high-rise apartment buildings. Some "detached" condos exist in some markets with a different layout. When you own a condo, you typically wind up sharing a wall or two with neighbors.
Condos are sometimes confused with townhouses. It should be noted that townhouses are a construction style, not the type of management that the structure falls under. Townhouses are similar to condos in many ways, and some townhouses are also condominiums.
Condominiums vary in size. They can be small, studio-style units or large three or four-bedroom units.
Pros of Investing in a Condo
Typically, condos are a cheaper option to invest in comparison to homes. Maintenance on condominiums is little to none. You are looking at no yard or lawn maintenance. This low-maintenance perk is great. For this reason, many investors set their eyes out on condos.
Condos offer an assortment of amenities that homes do not, ranging from security to pools. Many times, they have clubhouses, gyms, and many common areas. Because condos tend to be centrally located in more densely populated areas, many investors believe that they can get away with charging a higher rent charge. Many renters are interested in being located in the middle of everything for a convenience factor.
Although some will disagree, there are wide varieties of different kinds of condos to choose from when looking for an investment property, raising the appeal for both renters and buyers as they have many choices to discern between.
Along with a cheaper price tag, condos also come with less expensive homeowner's insurance. Condominium owners only need insurance that covers the inside of their homes.
Cons of Investing in a Condo
In some cases, a condo may come along with a monthly fee that may go up at any time. Condos are known to be a bit more difficult to secure financing for as well. Condominiums come along with rental policies in which some actually have rules and restrictions against renting, so this is certainly something to look out for. Keep in mind that those amenities that condos offer sometimes come along with an association fee.
When it comes to comparable sales for condos and selling the property for a profit, other units in the complex impact this. When properties are listed, the comps are taken into consideration and can dictate the pricing of your listing.
Condos bring a limited market for purchase and rentals. A condo requires the right buyer, someone who is looking specifically for a condo.
So is Buying a Condo a Good Investment?
For the most part, yes, condos make fine investments. They are great for newer investors that prefer a hands-off approach as they typically require less maintenance. As with any real estate investment you'll want to make sure you perform proper due diligence to ensure you purchase a condo that's been well maintained, and which can generate a decent return.
The Decision is Yours
As with any investment decision, it is specific to the individual person. For some, in certain situations, it is well worth it. For others, it can bring on more trouble and debt than they intended or foresaw. There really is no black and white here. Below are a few tips to guide you in evaluating the situation to decide if condos are a good investment for you.
Tips for Evaluation
Here are some key things you'll want to think about before deciding if investing in a condo is right for you.
Asking yourself if you are mentally prepared to take on an investment of this kind will assist you in bringing up scenarios in your mind of problems and hiccups you may experience during the process. Taking a look at your financial situation, time availability, and assistance available to you are three main components of determining your current ability to make the first move.
Do you have commitment issues? Owning a condo for investment, like owning your primary residence, is a commitment. This property is YOURS to take care of. If you are renting it out, this means that you will be trusting your tenants with your property, and you will be responsible for damages and messes. If something breaks, it is your responsibility to get it fixed.
Evaluating your personal financial situation in depth is paramount. There is not a magic number that you need to take on an investment like this. It will depend on many factors. Documenting and mapping out the many pieces that will impact your investment is a great way to get an idea of where you will need to be comfortable. As always, it takes money to make money.
Working with a realtor, you can gain some great insight into the resale value of the condo. In doing so, you will get a great idea of what the property is worth now and what it could be worth with certain upgrades. If renting the property out does not work out the way you had intended for it to, reselling is always an option, and it is important to know that value.
There is not a clear cut "yes" or "no" answer to whether or not condominium investing will be worth it. If you determine that there is a true value in the purchase and investment, then considering going all-in is worth it. Owning a condo for investment purposes can reap great rewards and has the potential to be the best decision that you've made.