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Hakim Solovyov
Hakim Solovyov

Is It Good To Buy Condos For Investment

Buying a condo that you plan to live in or rent out for more than five years was traditionally thought of as the best way to recoup your investment and sell for more than your purchase price. On the heels of the exceptionally inflated housing market of the past three years, this might no longer be the case. With housing prices at an all-time high in the past few years, the likelihood of selling for a significant profit in the next five to seven years has diminished.

is it good to buy condos for investment

This is especially the case in New York City, where some new buildings sold at a premium in recent years, featuring top-of-the-line amenities and cutting-edge technology and appliances. However, in five to 10 years, those properties will no longer be considered new, and there will be newer technology and appliances in newer buildings, so the chances of recouping your investment, if you paid a premium, are lower.

If you do decide to buy a condo that needs a complete renovation, the investment will ultimately pay off because of the exact reason that you got a great deal in the first place. Buyers and renters want a turnkey property; therefore, your home will more likely sell for a profit more quickly down the road. If you want to rent it out, that will be easier as well.

When it comes to condo purchasing, buying an investment property that you plan to rent out, for a short-term or long-term rental, still makes good economic sense. If you earn any rental income on your condo, then the interest on your mortgage is considered a business expense and is not capped. Your property taxes are also considered a business expense and are therefore not subject to the $10,000 tax deduction cap.

While it seems that renting an apartment rather than buying a condo may be the smarter financial decision in many cases in the current market, there are certainly pockets of the market that can be a great investment now, such as investment or vacation rental properties in popular destinations or homes that need significant work.

In general, condos appreciate in value at a slower rate than single-family homes. The median sales price of a condo was up nearly 10% year-over-year in October 2020, according to a report from Redfin. But the median sales price of single-family homes was up more than 15% in the same timeframe.

For those interested in communal living, condos offer attractive amenities. Many condo communities include grilling areas, gyms, pools, and other common areas. These attractive amenities can make it easier to find renters for a condo or guests for an Airbnb.

While convenient and cheaper than single-family homes, condos come with their share of drawbacks too. HOA fees and rental restrictions are just a few disadvantages you might be leery of as an investor and condo owner.

So, the condo values are going to drop like a rock! Why? Well, at that point, the only people interested in the condos will be cash buyers and investor buyers. And those types of buyers are bargain hunters who are only looking for the cheapest deal. That will kill your condo appreciation!

If you're buying a condo as a second home or vacation home you'll want to consider its potential to appreciate in price, as well as how much it will cost you compared to renting. If it's for a vacation home in a beachfront destination, it might have a lot of room to appreciate, making the condo a great investment. On the other hand, if you plan on using the condo as a second home in the country, you might be better off renting rather than buying.

Investing in condos makes a lot of sense if you want to start investing in real estate and earning passive income. Condos are great investments because of their compact size, which makes them less expensive and easier to maintain while offering higher returns on your investment. Buying a condo is the ideal choice for those just starting out with investment properties.

A condo, or condominium, is a private residence within a larger building or community. The most common types of condos are multi-story townhouses or single units in a high-rise with other condo units above and below.

The condo association takes care of the expense and the hassle of building maintenance and the grounds. Just remember that 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 it would help if you had 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.

Most condos have a high owner-occupancy rate. The bylaws often state that only a percentage of the owners can rent out their units. 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. That translates into a more attractive investment for you.

Residents are often prohibited from conducting local business activities from their condos (although this doesn't include remote work.) This, and other rules, helps to deter unwanted activity that leads to property depreciation.

I discovered water damage to the bedroom closet ceiling in one of my condos. The cause turned out to be an air conditioner leak in the unit above mine. The condo association did nothing to help me resolve the issue. I had to take the owner to court to get reimbursed for my repair cost.

An association board governs condos, often including community condo owners who volunteer or are elected. Typically, a group of investors owns the condo buildings and hires a property management company to administer the collection of condo fees and manage the community. State governments require that condos create and follow legal governing documents, such as bylaws and articles of incorporation. But there's still a risk that the condo association could mismanage funds and even become insolvent.

If you're ready to invest in condos and want to enter the landlord game, you can work with a local real estate agent to search for properties that meet your criteria and budget. However, be ready to take on property management responsibilities yourself unless you work with a third-party management company to find and interact with tenants.

Alternatively, you could invest in condos through various real estate crowdfunding platforms. Condos and residential real estate are very popular investments for crowdfunding platforms alongside residential real estate.

However, the advantage of crowdfunding companies over individual ownership is that the barrier to entry is low for investors. In fact, the top platforms let you invest in condos and other properties starting as low as $10 in some cases.

In the past, condos have appreciated slower than single-family homes over time. However, as single-family homes become more expensive, first-time homebuyers have been adding condos to their list of prospective homes, resulting in increased demand. This demand shift has led to a change in how quickly condos appreciate.

It also should be pointed out that, over certain periods, condos have even compared favorably to single-family homes. For example, Trulia conducted a report for The Washington Post, examining millions of properties in the 100 largest metropolitan areas between February 2012 and February 2017. It found that condos appreciated by 38.4%, while single-family homes appreciated by 27.9%.

Of course, this study doesn't take into account the record appreciation that we saw in the single-family home market post-COVID. However, it does show that condos can make an attractive investment for anyone looking to diversify their portfolio with real estate.

And as with any real estate investment property you're considering, run your numbers to ensure the rent will cover the condo fee and all other costs associated with owning and managing a rental property.

If you'd like to stay on the safe side but still get your feet wet in the real estate world, consider crowdfunding, which is regarded as a safer investment. Fundrise, for example, makes it easy to invest in REITs and get condos and other property types into your portfolio.

Whatever path you choose, it's certainly possible to turn a condo into a lucrative investment if the math makes sense. Just do your homework, decide how active you want to be with your investment, and choose an ownership path that makes sense.

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