25/04/2023
Are Condos A Good Investment?
Whether you’re looking for a home away from home or seeking a way to generate passive income, investing in property is often a long and complicated process. When purchasing a property, you want to be confident that it will fulfill all your personal and financial needs – which means research is of the utmost importance.
If you’ve started researching properties in your desired location, or if you just enjoy browsing real estate listings for fun, you may have noticed certain properties consistently come with a lower price tag – condos. But are condos a good real estate investment? In this article, we’ll explore how condos differ from single-family homes and what you need to know before investing in this type of property.
Why Buy A Condo?
If you’re wondering what a condo is, we’ve got you covered. A condominium – or condo – is a housing complex in which each unit is owned by an individual. There are both attached and detached condos, with detached condos lacking shared walls and attached condos sitting inside connected units.
Purchasing a condo certainly has its appeal, as they typically come at a lower cost than single-family homes and are also often located in more desirable locations, such as city centers. They can also be a smart option for military personnel, who may move often and can use a VA loan to finance a condo.
In addition to price and location, there’s also an element of peace of mind that comes with owning a condo due to something called a homeowners association (HOA). Condo owners are responsible for paying monthly fees to their condo association for things like exterior maintenance and additional amenities, such as access to pools or dog parks, depending on the complex. Although buying a condo means paying a little extra per month for these fees, not having to worry about landscaping and snow removal may be well worth the cost for some buyers.
Is A Condo A Good Investment?
Ultimately, whether or not a condo is a good investment will depend on several factors, including your intended use of the condo and the state of the housing market in the specific location you’re considering.
With lower purchase prices and more desirable locations, condos can certainly be profitable investment properties and a enjoyable vacation homes. But keep in mind that condos also come with less control, due to the community’s HOA. In addition to collecting fees from condo owners each month, HOAs have control over what goes on in their community. Some condos will not allow you to rent while others will allow long-term but no short-term rentals. Because these guidelines vary between communities, it’s important to understand the limitations of a specific condo before moving forward, as these laws could significantly impact or stop your plans for a rental property.
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What Is Your Primary Reason For Buying A Condo?
As we’ve mentioned, the potential benefits and drawbacks of investing in a condo will differ depending on its intended use, whether that’s a primary residence, a vacation home or a rental property – so let’s explore each in a bit more detail.
Buying A Condo Vs. Renting
If you’re considering a condo for your primary residence, you may be wondering whether you should purchase the condo or rent it. While renting can be an affordable option for those who aren’t ready to invest in real estate, buying a condo can be a practical and lucrative move that sets you up for future financial success. This is because purchasing a condo allows you to build equity in the home that you wouldn’t with renting. Buying a condo is also more affordable than a single-family home, making this option popular for first-time home buyers.
But keep in mind that these advantages also come with a few disadvantages. One of the reasons condos are more affordable is because they come with less space than a detached house, and despite being smaller, you’ll pay extra each month in HOA fees.
Are Condos A Good Investment For Rental Property?
If you’re looking to generate passive income, owning and operating a rental property is popular among real estate investors. With the rise in popularity of short-term rentals like Airbnbs, more and more travelers are considering rental properties over hotels for their vacations. Condos can be great for this, as most travelers are more focused on location than square footage, so the smaller size of a condo typically will not affect your bottom line, and you’ll pay significantly less for a condo in a desirable location than you would for a single-family home in the same area.
But remember condominium laws vary among communities and some prohibit short-term rentals, while others prohibit renting in general. When doing your research, make sure your specific condo guidelines allow for the property to be used as a rental.
Buying A Condo For A Vacation Home
Another reason someone may invest in a condo is as a vacation or second home. Buying a condo as a vacation home can be a great option, especially if you’re already paying for a mortgage on your primary residence, as you can save money while snagging a property close to your favorite vacation destination.
But whenever you’re investing in a vacation home, it’s important to consider how much time you’ll actually spend there. If you’ll only physically occupy the home for a few weeks each year, remember that you will be taking on another mortgage and paying each month for a property that’s just sitting there. In this case, it may be worth it to rent the property when you’re not using it. In fact, the money you make renting the property may cover your mortgage costs and HOA fees. But once again, if you’re considering renting the condo for even a small part of the year, be sure to confirm with the HOA that short-term rentals are allowed.
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