Condominium investment is a great way to get started in real estate. Even though there are a few challenges to this form of investing, it’s generally one of the better ways for neophyte investors to start building up a portfolio of rental properties.
Let’s take a look at the advantages and disadvantages of investing in condominium properties.
PRO #1: Lower Upfront Costs
Condos generally cost less than a house simply due to their smaller size. This makes it much easier to get the financing required to purchase a unit, especially since it is likely not your first property (assuming you own the place you’re living in.)
Getting a mortgage for real estate isn’t as difficult as getting a large business loan, but it still helps to aim lower and work your way up as your properties gain more equity.
PRO #2: Lower Maintenance Costs
A landlord with single family homes or duplexes have more things that can go wrong than a condo owner. The roof, yard, driveway, and all of the windows are a few examples.
Meanwhile condominium investment means all you have to worry about is your unit. When a new roof or driveway is required, at least you share those costs with the other owners in your building.
PRO #3: Less Upkeep
A single family home with a yard may need all of the following services done regularly:
- Pest control
- Weed spraying
- Pressure washing
- Lawn mowing
- Bush trimming
- Raking/leaf blowing
That’s not to mention other necessary services like trash and recycling. Condominium investment doesn’t include all of these nitty-gritty stuff. As the landlord, that’s more money in your pocket each month to invest in more property.
PRO #4: Better Resale or Rental Value Appreciation
No doubt, a strategically-located condominium complex is always attractive to a market eager to live with conveniences and amenities on hand. Condo units have always proven to be prime rental spaces, particularly among workers opting to relocate to urban communities. The same goes for those with primary homes but can afford renting a condo unit near their work area than commute daily.
That said, the potential of rental rates or resale value going up is much faster compared to single-detached homes or apartment complexes located farther from urban centers.
You may strike gold with condo investment, particularly if you make your purchase at significantly lower pre-selling rates.
But even though there is a lot of upside to purchasing and renting out a condo, it’s not all sunshine and rainbows. There are a few cons to think about:
CON #1: No Control Over Neighbors
When you live in a detached home with noisy neighbors, you have at least 10-20 feet between your residences. When you’re in a condo and have a noisy neighbor, you only have walls and a few feet separating you!
While having a noisy neighbor may be the least of your worries, having next door occupants who don’t care for their units well can affect your business. Potential renters will not want to live beside someone who doesn’t take out their trash regularly or has rowdy visitors over the weekend.
Thankfully, there’s the HOA to help you out with these concerns, but it can take some time before matters are addressed.
CON #2: All for One, One for All
When your condo’s roof leaks, guess who is responsible? That’s right—everyone. And while it’s nice that you get to share the cost, managing the contractor, paying for the service, connecting with all of your neighbors, etc. can prove to be a pain.
CON #3: Homeowners Association (HOA) Fees
Perhaps the worst part of condominium investment is the HOA fee. Even though HOAs have a nice place in community ownership, high fees can eat into your profits very quickly. Paying thousands of dollars a year just for the HOA is pretty common.
The Bottom Line
If you’d like to get started in real estate but don’t have a lot of time or cash to invest, condominium investment may be the best route for you. The condominium market is more volatile than detached houses, but has several benefits that make it a great option for new investors.