When it comes to real estate investing, most people think of single-family homes or apartment buildings. But condos, with their low purchase prices, make real estate more accessible to first-time investors.
Some people start investing in condos and never stop.
The question is: do they provide a good return, or are you better off going with a different type of property?
Location is Everything
Location is everything in real estate, but if you’re investing in condos, it’s even more important. Condos perform better in some locations than others.
For example, an oceanfront condo in Myrtle Beach will likely have a steady stream of renters, and its desirable coastal location may help the value appreciate quicker than the average condo. In some cities, condos are the only properties that provide oceanfront views and out-the-door beach access. These same principles also apply to major metro areas, like New York City, Los Angeles and Chicago.
With that said, condos in major cities will naturally come with a higher price tag and may not be as easily accessible for beginner or even more experienced investors.
Consider All of the Fees Involved
When you invest in a single-family home, you have to consider property taxes, utilities and maintenance costs.
With condos, you also have to consider HOA fees. Yes, there are also many homes that come with HOA fees, but generally speaking, condos have higher fees. And these fees can increase over time. It’s not uncommon for HOA fees to be $300-$400 per month.
There is an upside to paying HOA fees. You no longer have to worry about maintaining the lawn, exterior of the building and the roof. If the community offers amenities, like a pool and gym, these can be major selling points for some tenants.
Some communities prohibit owners from renting their units, so you’ll need to go over the bylaws with a fine-tooth comb.
HOA fees may not be a problem if you can find a small community in which all of the buildings are for sale. If you were to purchase all of the units, you would become the HOA. But you’d also be responsible for maintaining the exterior, lawn and everything else that a conventional HOA would take care of.
Choosing the Right Unit
Some condo investments may be better than single-family investments. It all depends on the market, the location and the building. Certain units within a building are more desirable and will rent more quickly than others. These units will likely sell for a higher price than other units, too.
These are generally condos that are on higher floors, have better views and/or have a better layout.
Condos are often more liquid than single-family homes. Because of their lower price points, they tend to sell quicker, and there are usually plenty of buyers to go around. In many cases, these types of sales can close more quickly than with single-family homes.
It’s difficult to say whether condos provide a good return on investment. It ultimately depends on your investment goals, the individual unit in question and the location. At the right price and in the right location, a condo can provide a better return than a single-family home.