Some people may find buying a condo in their best interest, others don’t. Buying a condo is a good investment for you, especially? At the end of this article, you will be able to determine for yourself whether you are the right candidate to invest in a condo community – whether you are looking for an investor or private housing.
First, let’s see what a condominium is and finally who has control over it.
What is a condo?
Owning a home means you own the unit and property, while a condo is completely different. Basically, a condo owner only owns the airspace within a separate unit in a building. They share ownership and responsibility for common areas and communal property such as stairs, hallways, walls, outdoor areas and sidewalks.
HOA vs. condo association
Homeowners in private communities usually have to pay a condo or HOA fee. Although both HOA and condo associations exist to maintain rules and guidelines within the individual community, these associations differ from each other based on the differences between homeowners and owners of a condo community.
Since the main difference between homeowner and condo ownership, which we just discussed, is the amount of ownership, buyers have a different role to play in this situation when it comes to participating in community association boards and decisions.
Condo owners share collective ownership, and therefore, shared interests or responsibilities due to the division of community-owned residents. With homeowners associations, owners are responsible for their personal property and lots. Unlike the condo community, the HOA actually owns common areas within the private community.
So, after learning the owners of a condom have nothing more than air space in their units, you must ask yourself the central question of this article: “Is buying a condom a good investment?” Well, let’s look at some of the positive aspects of condo ownership.
More about condos from BiggerPockets
The benefits of investing in condos
If you choose condo ownership for your housing investment, there are several good things about living in a condominium:
1. Cash flow
The number 1 advantage of a condo owner is the easy possibility of increasing cash flow. Condominiums are usually built in densely populated areas such as cities, tourist centers and near university / college campuses. For these reasons, investors can usually take advantage of the rent-to-purchase ratio.
They can buy condo units at lower prices and charge higher rental rates, creating a stronger cash flow. Holiday rentals can increase cash flow, especially for an investor, due to the increase in weekly rental rates depending on the acu and local events. Tourists are usually willing to pay more when visiting for specific reasons.
One of the best things about condo ownership is that you share the benefits with the condo community. Condominiums include a monthly fee known as a common charge, which covers general benefits.
Here is a list of several common condominium benefits:
- 24 hours security
- Swimming pool
- Dog Park
- Exercise gym
- Tennis court
- Electric car charging station
- Bike storage locker
- Recycling Center
One thing that appeals to certain buyers is that condominiums are not cookie-cutters as much as one might guess. In reality, condo communities generally take pride in the fact that each condo is unique. However, the difference between other markets (such as townhouses) is that their properties and homes look the same.
4. No maintenance
Potential buyers of condos fit into two categories: first-time home buyers or retired couples. First-time buyers are usually not prepared for all the expenses of the home and retired couples are usually trying to make it smaller.
The main selling point of a condo community for this target market demographic is the slight maintenance cost. They don’t have to worry about maintenance, such as mowing the lawn in the summer and snowing in the winter. Repair and maintenance costs are kept to a minimum.
Condos are usually a cheaper investment than buying a single family property. Of course, this is not always the case due to changes in the housing market. Just keep in mind that since condos are usually cheaper in price, they are easier to sell in the overall housing market.
Now that you know something positive about investing in a condo ownership, let’s be aware of some of the negatives you need to be aware of.
The difficulty of investing in condos
While some professionals are involved when investing in condominium, you must look at the difficulties in making an informed decision about whether buying a condom is a good investment for you.
In addition to your regular tax payments, interest, and mortgage policy, you need to factor in the association fee. This fee can be-100- $ 300 monthly and can play a big role in buyers not wanting to buy when you are ready for sale.
2. Limited market
Since condos usually appeal to first-time buyers or elderly retired couples, your buyer’s market is narrowed to that specific population. You probably won’t be able to create a bidding battle for your property – and a limited market means it can be difficult to sell.
Condos are not as appreciated as single-family single dwellings. The rules applicable by the Condo Association Board may contribute to this lack of appreciation. Also, cash flow, despite the potential to be great, can still be unpredictable.
Are you a person who likes to party or visit family members frequently? Condo ownership means spark parking. Lack of privacy and space drives shoppers away from the condo community sooner or later.
5. Comparative sales
When you sell, buyers will judge you against the other condo units in the complex. Even if you improve your unit, they won’t be enough to increase your sales price compared to other units with the same amount of bedrooms and bathrooms.
6. Your unit is a bubble
When you make a purchase, your home inspector has your dishwasher working and is there to make sure your hot water tank is not antique. That’s it. They do not check the condition of the building. In fact, if there is no reason for an association to believe that there is a problem, no such report or investigation exists.
There are very few ways for the buyer to make sure the building is not leaking or that there are other material defects. Developers don’t always stay in the building business honestly. Instead, they are in the business of defending their bottom line. This can lead to shortcuts that may go unnoticed.
Find financial freedom through rent
If you are thinking of using rental property to create wealth, this book is a must read. With about 400 pages of in-depth advice on creating wealth through rental properties, Books on rental property investing Provides practical and exciting strategies that investors use to build cash flow and assets.
7. Rules, regulations, and rental policy
You There is Be familiar with the Condo Association’s rental policy before investing in such real estate. The Condo Association has strict rules and regulations that you will not be aware of unless you read them. All Of the ruling documents.
Even if you have to read them with a glass of wine, read them! You need to know what kind of deal you are making when you buy a condo. Do they allow you to rent your unit? Are pets allowed on the lawn? Do you have permission to have three children? Can there be Christmas decorations for the New Year? Save yourself from making a big mistake and read all the rules and regulations before investing in a condo community lifestyle.
8. Condo Association Board
Strict rules, guidelines and regulations are enforced by the Condo Association Board attached to each condominium. This means that your life and your condo unit are completely managed and controlled by a group you have never met. You have no power.
One way to solve this problem is to get as involved with your board as possible. Attend meetings, get involved in community projects and apply for positions on the board. If you want to see changes, it’s your responsibility to make those changes. However, be prepared to invest a lot of your time, money and energy. Achieving the changes to the regulations you seek can take years of advocacy and hard work.
After considering the advantages and disadvantages of condo ownership investment, you need to consider a number of questions before proceeding with the purchase.
Ask questions before buying condos
You have to be your own detective. If you’re going to buy a condo built in the 70s that never had its siding replaced, you have the first formula to buy.
You want to be prepared with a number of questions to ask before making your final purchase decision:
- What does insurance cover?
- Can I fully understand the rules and regulations, and read a copy of them to me?
- Do I fully understand the monthly fee?
- Is there an ongoing lawsuit?
- Do you have a resale package that I can see?
- How often do you check your fire alarm system?
Keep in mind that a mortgage lender will verify and select a particular condo community before approving you for a cond.
If you are a first time home buyer or an adult, to make it smaller, buying a condo can be a good investment for you. If you want to buy a single family home there will be less down payment and minimal maintenance costs.
If you don’t fit into this narrow segment of the population buying a home, you may want to consider renting instead of buying. Residents who are tenants have to think about lower costs and responsibilities than their owners. Rules and regulations do not affect your ability to go out because you do not have to worry about selling your unit.
For investors, consider how much you are willing to deal with the unique difficulties of buying a condo before investing in this market. While they can be beneficial, condos can also create big headaches.
Overall, to answer the question, “Is buying a condo a good investment?” You need to look at the current level of your life and consider all the advantages and disadvantages discussed in this article.