It depends on some key things, as does any real estate investment.
Most important are the property’s location and the financials. No matter what, the condo’s location has to be a desirable one with a qualified pool of tenants.
In addition, the return on investment (ROI) of the specific property needs to be in synch with your investing goals.
Condos make up a portion of my real estate portfolio, along with single-family residences. So I’d say that, yes, a condo can be a good investment.
Here are the pros and cons to consider.
Investing in Condos Pros
Less maintenance to worry about
One of the biggest benefits of condo ownership is that other people do the exterior property maintenance for you. Neither you nor your tenant bears the responsibility to shovel the snow or mow the lawn, for example.
As a condo owner, you don’t have to budget for big expenditures like replacing a roof. You own the space inside the condo but not the building’s exterior structure. So you have to worry only about maintaining the appliances and systems contained within your unit.
The condo association takes care of the expense and the hassle of building maintenance and the grounds. (But there’s no hard and fast rule of condos. Each association decides what the condo association is responsible for and what the owners are responsible for. So read the condo docs carefully before buying.)
As an investment, it’s typically less expensive to purchase a condo than a single-family home or townhouse with similar features. So you need less out-of-pocket cash to get started. If you need a loan to help pay for renovations or repairs, you can use Monevo to compare all of the options available to you.
And if you’re looking to buy a condo but aren’t really sure where to begin, you can use a service like HomeLight to find a real estate agent in your area.
However, make sure the monthly rent you’re able to charge can support all your ownership costs, including the monthly condo fee. The purchase price of a condo is less because homebuyers factor in that recurring fixed condo fee.
A big benefit of condo living is access to high-quality community amenities. There’s often a club room, pool and fitness room. These amenities are very attractive to many tenants, which helps you keep your unit rented. Properties with attractive amenities are often in high demand. That can mean a quick turnover when a tenant moves out. Short vacancies are an investor’s best friend when it comes to managing cash flow.
Pride of ownership
Most condos have a high owner-occupancy rate. The bylaws often state that only a percentage of the owners can rent out their unit. This typically translates into a pride of ownership that encourages community and responsible care of one’s property. Owners typically take better care of their property and the shared community resources than renters do. That translates into a more attractive investment for you.
Most condo buildings have enhanced security. You usually need a key to access the building before getting to the front door of your unit. Each unit is equipped with an intercom that residents can use to “buzz in” approved guests and visitors. This added security makes residents feel safer and keeps out solicitors — an attractive feature that many tenants will pay a premium to enjoy.
Condo rules can preserve your investment property’s value
There are typically more rules to follow as an owner in a condo community. You’ll need permission from the condo association to make changes to your unit, inside or out. Chances are you can’t change the color of your front door, for example. Often, residents are prohibited from conducting any business activities from a home office. Condo rules are likely more stringent than similar properties not deemed a condo. This helps to deter unwanted activity that leads to property depreciation.
Condo rules and regulations are often exactly what’s needed to keep a tidy community that benefits all owners. Your tenant may not be able to grow herbs in pots on the patio, but you also won’t have to worry about a neighbor’s patio becoming a storage space for junk.
I like to invest in rental properties where there’s a modest condo or homeowners association (HOA) fee. The association serves as a policing force that prevents owners from neglecting their property and discourages bad behavior by residents. This helps maintain home values and makes the property attractive, which is important whether I’m seeking new tenants or looking to sell the property.