If you are looking to get started with real estate investing and are not exactly sure what type of investment would be the best option for you then continue reading because we are going to break down in this article why we think a condo for investment can be one of the best real estate investment decisions that you make this year. We will outline everything that you need to know regarding condos for investment so that you can go out there and make the best investment decisions.
Before we get started with the main points of this article it is important to define exactly what a condo is so that you have a pretty good understanding from the very beginning.
What Is A Condo?
A condominium or more commonly referred to as a condo is a home that is owned by a private resident and the condo is part of a larger building or community. Condos can be rented out to tenants and in this way they can feel very much like apartment buildings. But the main difference between an apartment building and a condo is that condos are owned by the individual investor whereas apartments are rented out to tenants by the person that owns the entire apartment building.
If you are looking to purchase a condo as a property investment then you will purchase the condo and then pay a monthly condo fee. This condo fee will cover things such as maintenance and upkeep of the condo itself.
Condos can be a very attractive and lucrative investment for anyone who is trying to get started in real estate. They often have lower prices attached to them and that is one of the main reasons why people decide to invest in condos in the first place. But keep in mind that it is not all sunshine and rainbows when it comes to condo investing, there are some important drawbacks when it comes to these types of investments and we will be going over all of these in this article.
Why Condos Make Good Investment Properties
They Come At a Low Cost
When you take a look on the real estate market you will find out that condos are significantly cheaper compared to a traditional single-family home. Often the price difference between a condo and a single-family home can be half the price. So if you are able to get a home for $120,000 then a comparable condo will be $60,000.
For first time people that want to get involved with real estate investing, price can be one of the biggest determining factors deciding whether or not somebody will be able to get started investing. Condos are one of the most affordable ways that somebody can get started with real estate investing.
Often In Good Locations
Condos are typically located in areas where there is a shortage of single- family homes or multi family homes for that matter. That is why you can find the most dense concentration of condos in downtown areas and in attractive vacation spots, making them an ideal location to live in. You may have driven through a nearby vacation spot and noticed all of the condos and thought to yourself that it would be very nice if you were able to live in one of these vacation hotspots.
Generally Lower Maintenance
One of the main reasons why a condo for investment is a great option is because, compared to your traditional single-family home, condos generally have much fewer maintenance problems to take care of due to the nature of how they are built and structured.
Single-family or multi-family homes are usually much bigger than condos and whenever you have a bigger space, that then leaves more room for things to go wrong that would require maintenance or repairs. With a condo you can expect to do minimal maintenance while still being able to keep the premises in a habitable and safe condition.
Less Individual Expenses
When you purchase a condo then the condo fee itself will cover some of the expenses of the unit which you would usually have to pay for separately. It all depends on the condo building but some of the expenses that can be covered in the condo fee include building insurance, cable television, garbage collection, pest control services and water.
Condos Have High Quality Amenities
The best thing about owning a condo is the high quality amenities such as a club room, pool and fitness room. Often lots of money has been put into these amenities to give the people staying at the condo the best living experience possible. You can use these amenities to your advantage in your marketing efforts to land more tenants as having these amenities is a very attractive feature of the condo to tenants.
Condos with attractive amenities will be in higher demand compared to others in the same area without such amenities. So if you are fortunate enough to be able to invest in one of these condos with amenities then it will greatly work in your favor to do so.
High Level of Security
Security is probably one of the most important things to take into consideration when purchasing a condo. Often condos have very tight and high-end security compared to regular single-family/multi-family homes and apartments. The owners of the condo building will often invest a lot of money into having top notch security at their condo building and the cost of this security will be split between all the various condo owners in the building.
With many condos they have implemented the buzzer security feature and every condo will have an intercom and when someone rings the buzzer for the specific condo number, they will have to buzz the person in. This really makes people feel safe and keeps out solicitors and criminals from entering the condo. Many people will often and do pay premium prices for such security and this high end security can be used in your marketing efforts as well to attract more potential clients.
It is all well and good to know all the good things about owning a condo, but you may be wondering about the drawbacks to owning such investment properties. While a condo for investment is one of the best investment options which comes with a whole array or pros, let’s now talk about some of the potential cons to owning a condo.
The Cons Associated With Investing in a Condo
Hard to get financing for condos
When it comes to financing your condo, sure you can get a mortgage for it but it will be substantially more difficult to acquire a mortgage for a condo compared to a regular single family home or a multi-family property. When it comes to acquiring the mortgage for your condo lenders will typically only lend if the condo is 50% owner occupied and has an accompanied homeowners association with it.
There Are Condo Association Fees
An average condo will have a homeowner’s association that has a monthly fee and in certain circumstances these monthly fees can be extraordinarily high. These condo association fees can be worth paying for, depending on all that they cover. But when someone is first looking to invest into a condo and then they are presented with the condo association fee, that often comes as a big shock to them and could put them off the entire deal all together. This fee also just adds another expense that your monthly rental price that tenants are paying has to cover. When it is all said and done, condo association fees add a significant cost to the entire process of owning a condo. So it is important to be aware of these fees so that you have all the required information regarding condo for investment before you make your actual purchase.
Restrictions on rentals
Depending on the condo that you purchase you may be limited to what you are allowed to do with regard to renting. We know from experience that some condos don’t allow you to rent them out at all, which will make your condo for investment not such an ideal investment. You absolutely want to make sure that the condo that you purchase does in fact allow you to rent it out. Otherwise you will be sitting with a sticky situation on your hands when you are not able to rent out your condo. Having this knowledge prior to making your condo purchase is essential. You may be met with some other restrictions, for example only being allowed to rent out your condo after you have owned it for a full year.
Appreciation Is Slower
Condos, compared to your typical single-family home or multi-family property, will increase in value at a much slower rate. That’s important to know before you make your condo purchase for investment. While condos are a great option for people that are looking to secure a solid passive income quickly, when it comes to appreciation of the property over time it will be much slower compared to your faster appreciating single/multi-family property.
Now that we have gone over some of the pros and cons of a condo for investment, let’s talk about some of the questions you as a potential condo buyer need to be asking before you make your actual purchase in order to get all your questions answered correctly so that you understand fully everything that is involved in condo investing.
Here are in our opinion the most common questions that you should be asking before you make your purchase:
- How long do you plan on keeping the condo?
- Is the building you are considering currently under any litigation?
- What are the lender financing requirements?
- Is your condo in an area with a high rental demand such as near a college?
- Is the location you are considering getting more popular or unpopular?
- What is the typical annual rent you can expect to get from your condo?
If you go ahead and ask these questions, then you will be better equipped to make a better buying decision and just remember that there are no stupid or unimportant questions when it comes to investing in a condo or anything for that matter. You always want to make sure that you are coming into the investment with everything in your favor and all of your questions answered.
In a nutshell, is a condo a good investment option? Well there is no clear and precise answer to this question. A condo will be a great investment for some, while for others it won’t be so ideal and you might as well be better off investing in a single family home or multi-family home.
But in our opinion if you ask us, we think that a condo as a first time investment is a great option if you do not want to have to deal with all the extra maintenance and repair issues of a traditional investment home. So in a nutshell, we think that you absolutely should invest in a condo if you have weighed out all the pros and cons and think it would be a good fit for your portfolio.
We hope that we were able to answer all of your questions within this article. Remember it will always be in your best interest to get as much knowledge as possible on a condo for investment before you make your purchase to avoid any future headaches and frustrations caused as a direct result of lack of knowledge.
We are also in no way giving your financial or investing advice in this article and on the rest of our website. If you have any further questions or concerns then feel free to get in touch with us here and we will do our best to get back to you as soon as possible. Also feel free to browse the rest of our website. With many years of experience in the rental space we have years of knowledge that you could potentially benefit from.