ARE CONDOS A GOOD INVESTMENT? Benefits & Drawbacks And How Well They Appreciate In Value

are condos a good investment
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Table of Contents Hide
  1. Are Condos a Good Investment?
    1. Why Are Condos Profitable Investments?
    2. Is Buying a Condo a Good Investment?
    3. Do Condos Appreciate In Value?
    4. What You Must Know Before Purchasing A Condo
  2. Primary Reason For Buying A Condo?
    1. Condominium Purchase vs. Rental
    2. Investing In A Condo As A Vacation Home
  3. Are Condos a Good Investment for Rental Property
    1. How Do Condos Work?
  4. What Is Covered By Condo HOA Fees And How Much Do They Cost?
  5. What Elements Should You Take Into Account Before Renting or Purchasing a Condo?
    1. #1. Affordability
    2. #2. Cost
    3. #3. Maintenance
    4. #4. Location
    5. #5. Amenities
    6. #6. Long-Term
    7. How to Locate Condo Complexes in Your Area
  6. What Is The Difference Between A Condo, House, Apartment, And Townhouse?
  7. Are Condos a Good Investment 2023
    1. #1. Observe the Items That are not Selling.
    2. #2. Examine the Current Inventory.
    3. #3. Note that Demand may Alter if Travel Restrictions Become Less Restrictive.
    4. #4. Consider Trends That Could Disrupt Seasonality in the Past.
    5. #5. Be Careful of Property Taxes.
    6. #6. Request the Minutes of the Most Recent HOA Meetings.
  8. Why You Should Invest In Condo
    1. Advantages of Condo as Investing
    2. Disadvantages of Condo as Investments
    3. Questions to Ask Prior to Buying a Condo
    4. Why Condos Are Outstanding Investments?
  9. What Are The Different Types of Condos?
    1. #1. Freehold Condos
    2. #2. Leasehold Condos
    3. Extra Condominiums Options
  10. Is It Good to Invest in Condominium?
  11. What Are the Disadvantages of a Condo?
  12. Are Condos a Good Investment 2023?
  13. Do Condos Appreciate or Depreciate?
  14. What Is the Downside of Buying a Condo?
  15. Is It Hard to Resell a Condo?
  16. How Long Should You Keep a Condo before Selling?
  17. Related Article

There are numerous things to consider when looking for a home. One possibility is to purchase a condominium. However, what is a condo? Take a look at this realistic option for a first-time home buyer. Here are the reasons why we should invest in condos as a good investment for a rental property in 2023. Enjoy your research!!!

Are Condos a Good Investment?

If you wish to invest in real estate, condominiums can be profitable, economical, and less stressful. They are an excellent way to enter the rental property investment market, and if done correctly, they can be quite successful.

What is a condominium? A condominium is a housing or residential complex consisting of individual ownership of separate units.  Now, although you own a condo unit, you do not own the property on which the building sits.

Condominiums are often less expensive than single-family homes and are frequently situated in more desirable areas, such as city centers, which adds to their attractiveness. They can also be a wise choice for military people, who may relocate frequently and can finance a condo with a VA loan.

In addition to pricing and location, condo ownership provides a measure of peace of mind thanks to something called a homeowners association (HOA). Depending on the building, condo residents must pay monthly charges to their condo association for external maintenance and innovative features, such as access to pools or dog parks. Some purchasers may find it well worth it to spend a little more per month for these services in exchange for not having to deal with landscaping and snow removal.

Why Are Condos Profitable Investments?

Here are reasons why condos are a good investment:

  1. Condos are often less expensive than duplexes and townhouses. This makes it easier for a novice investor to save for the required down payment.
  2. Condominiums, like all other types of real estate, tend to appreciate over time. And because the value of any property is also dependent on its location and condition, it is essential to keep this in mind when purchasing a condo.
  3. They are typically sold during the pre-construction phase, which provides convenience and payment flexibility. It also allows you to make unique tweaks that can be made to your machine to make it more suitable for you.
  4. Condos include a variety of desirable features that single-family homes often do not, such as a pool, fitness center, mini-mart, movie theater, and others.
  5. Condominium owners often do not need to worry about external building maintenance and repairs, as this is the responsibility of the property management. You are exclusively responsible for maintaining your own unit and paying service fees. This assures that the outside maintenance is in excellent condition and that the home value will not decrease.
  6. Compared to duplexes and townhouses, condominiums are superior possibilities for short-term rentals and Airbnb. And short-term rentals are an excellent source of cash flow.

However, condominium investing carries the same hazards as any other real estate investment, but with due study and careful preparation, you should be able to mitigate these risks. Now, let us know if buying a condo is a good investment. 

Is Buying a Condo a Good Investment?

Whether or not a condo is a suitable investment will ultimately depend on a number of factors, including your intended use of the apartment and the housing market in the city you’re contemplating.

Due to their reduced purchase costs and more attractive locations, condominiums can be both productive investment assets and pleasurable holiday homes. However, keep in mind that condos come with less control because of the HOA. In addition to collecting monthly fees from condo owners, HOAs have authority over their neighborhood. Some condominiums do not permit rentals, while others permit long-term but not short-term rentals. Due to the fact that these regulations differ throughout communities, it is essential to understand the restrictions of a certain condo before moving further, as these regulations may greatly affect or halt your plans for a rental property.

Do Condos Appreciate In Value?

Despite the fact that condominiums typically appreciate at a slower rate than single-family homes, condos in attractive locations may increase in value more quickly. Nevertheless, variables such as community facilities, property maintenance, and pedestrian-friendly to adjacent towns and attractions can accelerate a condo’s appreciation.

What You Must Know Before Purchasing A Condo

There are many aspects to consider when acquiring property, and there may be a few more factors to consider when purchasing a condominium compared to a single-family home. We advise prospective buyers to consider each of the following factors.

#1. Fees for condo associations

As previously indicated, condo association costs are a consideration when purchasing this sort of property. In addition to monthly mortgage payments and property taxes, condo owners are responsible for monthly HOA fees, which must be factored into their monthly budget.

#2. Certain Limitations

Depending on the condo community, some restrictions may apply, including limitations on how the property can be used. While some condo organizations forbid renting, others have other limitations, such as prohibiting the growing of livestock or demanding routine lawn maintenance. Before acquiring a condo, ensure that you have a thorough understanding of the community’s laws and regulations in order to avoid unpleasant surprises in the future.

#3. Financial Challenges

Financing a condominium is similar to financing a single-family house, although it is typically more difficult due to additional stages and paperwork. This is mostly attributable to the HOA or management organization responsible for operating the condo development. When a condo buyer applies for a mortgage, the lender is effectively approving both the buyer and the community for financing. The procedure may take longer if the lender must wait for particular documentation from the HOA. Condominium interest rates are normally slightly higher than those for single-family homes.

Primary Reason For Buying A Condo?

As previously indicated, the possible benefits and cons of investing in a condo may vary based on its intended use, whether as a primary residence, a vacation house, or a rental property.

Condominium Purchase vs. Rental

If you’re considering a condo as your primary residence, you may be unsure whether to purchase or rent the unit. While renting might be a cost-effective alternative for people who are not yet prepared to invest in real estate, purchasing a condo can be a wise and profitable move that positions you for future financial success. This is because buying a condo allows you to generate equity in the property, whereas renting does not. Condos are cheaper than single-family homes, making them an attractive option for first-time purchasers.

Investing In A Condo As A Vacation Home

A condo may also be purchased as a vacation or secondary residence. Buying a condo as a vacation home can be a terrific alternative, especially if you already have a mortgage on your primary abode since you can save money while securing a property near your preferred vacation destination.

However, while purchasing a vacation house, it is essential to evaluate how much time you will spend there. If you will only occupy the home for a few weeks per year, keep in mind that you would be taking on another mortgage and paying each month for an empty property. In this situation, it may be worthwhile to rent out the property when it is not in use. In fact, the rental income may be sufficient to cover your mortgage and HOA fees. Again, if you plan to rent the condo for even a tiny portion of the year, you must confirm with the HOA that short-term rentals are permitted.

However, keep in mind that these benefits also come with a few drawbacks. One of the reasons condominiums are more economical than single-family homes is that they have less space, but you’ll still pay more in HOA fees each month.

Are Condos a Good Investment for Rental Property

Real estate investors frequently choose to purchase and operate rental properties in order to generate passive income. With the surge in popularity of short-term rentals such as Airbnb, an increasing number of vacationers are choosing rental houses over hotels. Most tourists are more concerned with location than square footage, so the smaller size of a condo will not normally affect your bottom line, and you will spend substantially less for a condo in a good area than for a single-family home in the same neighborhood.

However, keep in mind that condominium laws differ by community, with some prohibiting short-term rentals and others prohibiting rentals in general. Ensure that your condo’s unique rules allow for the property to be utilized as a rental when conducting research.

How Do Condos Work?

The shared common areas and amenities, which include lawns, swimming pools, tennis courts, and more, are an important aspect of a condo. In essence, it is a mixture of everyone else’s and yours. But these benefits have a cost. Dues are paid by condo owners to a board or homeowners association (HOA). These HOA dues go toward maintaining the common parts of the property as well as covering the expenditures associated with condo living. Condo owners, however, cannot totally avoid the difficulties of owning. They are still in charge of keeping their particular unit in working order. Therefore, expenses like fixing damaged equipment would be paid out of your own money.

What Is Covered By Condo HOA Fees And How Much Do They Cost?

The size and location of a given unit can have a big impact on the HOA fees. Your HOA expenditures will be considerably impacted by the building’s age.

The monthly HOA dues may range from $100 to $1,000 depending on the neighborhood. However, HOA dues are often in the $200–300 per month area.

This cost typically covers upkeep, city services, pest control, and common area insurance. However, it is unlikely to cover renovations to your specific unit. Remember that your capacity to finance a certain apartment may be impacted by the monthly HOA dues. Budgeting is essential for both your mortgage payment and HOA dues. You cannot afford the condo if you cannot afford either.

What Elements Should You Take Into Account Before Renting or Purchasing a Condo?

Are you debating whether to purchase a condo or rent one? Before making this choice, take the following into consideration.

#1. Affordability

Your financial situation is important when deciding whether you should buy or rent a condo, as it is with any type of housing. You’ll need to put money down for a down payment and closing charges if you want to purchase a condo. Even with your HOA fees taken into account, you still need to be able to afford the mortgage payment.

Condo rentals require less dedication. No significant down payment is required. If you decide that you don’t like the building, you can always choose to leave your condo at the conclusion of your contract as a tenant.

#2. Cost

Depending on the building and where you live, condo prices might vary greatly You must think about the long-term costs while purchasing a condo. HOAs frequently use special assessments in addition to the usual HOA charge to obtain money for significant projects. For instance, you can be responsible for thousands of dollars in costs if the building requires a new roof.

However, as I am a tenant, I am liable for those substantial costs. Additionally, renters just need to pay a deposit, which is typically equivalent to one month’s worth of rent. That is substantially less expensive than putting down a down payment on a condo.

#3. Maintenance

The upkeep of the condo unit is the responsibility of the owner. The unforeseen maintenance fees that come with condo ownership can be avoided if you rent.

#4. Location

The greatest location must be chosen while purchasing a condo. It can be difficult to sell condos. With that, you don’t want to get trapped in an undesirable area.

However, if your lease expires, you as a renter have the choice to move out. That gives you greater freedom to test out several venues and pick the one that fits you the best.

#5. Amenities

The amenities provided are one of the main selling elements of every condominium complex. Finding a condo with the correct features for your lifestyle is essential whether you are buying or renting.

#6. Long-Term

As with every house purchase, you must decide what you intend to do with a certain property. Do you intend to stay for the long haul or are you just going to enjoy the location for a few years?

Renting can be the best option if you’re seeking a temporary home solution. But purchasing a condo can be a better option if you plan to stay in a place for a while. You must ultimately choose the course that best suits your objectives and financial situation.

How to Locate Condo Complexes in Your Area

Finding a condo community in your neighborhood is the next step if you’ve determined that a condo is the best option for your housing needs. The best course of action is to contact a nearby Realtor. They can help you navigate the condo buildings in your neighborhood to pick the one that is most appropriate for your needs.

What Is The Difference Between A Condo, House, Apartment, And Townhouse?

One sort of property ownership is a condominium. Condos, homes, apartments, and townhomes are additional popular choices. But how do they differ? Here is an explanation:

  • Apartment: Multi-unit buildings include apartment buildings. Apartment complexes, however, are often owned by a real estate business and maintained by a property management organization, unlike independently owned condos.
  • Townhouses: They have common walls with adjacent dwellings. A townhouse, however, cannot have a unit above or below it, unlike a condo. Townhouses typically have HOAs to take care of the units’ exteriors. However, other than that, there are not many amenities.
  • House: A house is a detached home with a higher price tag than a condominium. Homeowners are normally responsible for maintaining the interior and exterior of the property, even though there may be an HOA present.

Are Condos a Good Investment 2023

In the second quarter of 2023, realtor Becki Danchik of Coldwell Banker Warburg anticipates a more robust condo market. She explains, “The current condo market action is a precursor to what’s to come over the next few months, especially with the spring market on the horizon.

Here are six recommendations for navigating the condominium market this spring and summer, including how to identify an amenable seller and what to watch out for in the long run.

#1. Observe the Items That are not Selling.

When supply is limited and demand is great, your best chance of finding a deal may be to seek where others aren’t. Noah Rosenblatt, the co-founder of UrbanDigs, has a crucial piece of advice: “While most buyers concentrate on new inventory, consider searching for unsold houses and sorting by ‘days on market.'” This is especially true in the condominium market, which has not experienced the same extreme fluctuations as the market for single-family homes. These vendors are more motivated and may be amenable to more aggressive negotiations.

#2. Examine the Current Inventory.

Alex Algarin, a Compass agent in Miami Beach, advises condo purchasers to do their search using data. He suggests considering the present inventory and the time required to sell all of the units at the asking price. This score reflects the current bargaining power, and in many areas, it indicates a favorable prognosis for purchasers. Speaking to his local market, he explains, “As of January 2023, Miami Beach has 5.8 months of inventory for condos priced between $600,000 and $1 million, indicating that property values will continue to rise at a modest clip.”

#3. Note that Demand may Alter if Travel Restrictions Become Less Restrictive.

Kimberly Jay, a Compass broker headquartered in New York City, forecasts that the low demand for condominiums observed over the past two years will change this year. Jay says, “As COVID-19 constraints relax, particularly travel restrictions, I anticipate the return of international buyers, which will increase condo demand.” How must local purchasers prepare? She suggests obtaining a pre-approval and a real estate attorney so you can remain competitive even if the number of buyers increases.

Despite the fact that prior trends might help buyers and real estate agents anticipate market changes, massive population fluctuations can render these trends obsolete. If you plan to buy a condo this year, Algarin advises you to remember that historical trends are not the best indicator of the current market.

For instance, in Miami, where Algarin is located, there has been an inflow of new people due to the pleasant climate and thriving technology industry. He states, “Unlike previous years, Miami Beach has nearly surpassed its beachfront property capacity.” The lack of seasonality and the fact that many people have made Miami Beach their primary residence have an effect on the velocity and availability of transactions.”

#5. Be Careful of Property Taxes.

Even if you believe you’re getting a fantastic deal on a new-construction condo that’s been on the market for a few months, you should consider how real estate taxes may fluctuate. Isil Yildiz, a Compass realtor headquartered in New York City, advises buyers of new construction to be mindful of property taxes. The exact tax assessment for new development will not be disclosed to buyers until considerably closer to the sale closing.”

Yildiz recalls projects in which the assessed taxes were 40 to 400 percent higher than predicted and marketed; you may not be willing to take this risk.

#6. Request the Minutes of the Most Recent HOA Meetings.

Before celebrating your new condo ownership, there is one more piece of advice you should heed if you have discovered an incredible deal in an older building. Shannon Kutchek of the Smothers Group at Compass advises, “Request the homeowners association’s most recent minutes to gain insight into potential future special assessments.” The monthly HOA dues might skyrocket when a building requires a new roof or elevator.

Why You Should Invest In Condo

Condominium investments can provide exceptional profits if executed properly. As with any investment, your exact outcome depends on a number of things. Location and market conditions in your region are significant factors. Condos are beginner-friendly for novice real estate investors in general. This is so because:

  1. Typically, you buy new, so there are fewer repairs.
  2. You pay condo fees, thus maintenance and upkeep are not your responsibility.
  3. As urbanization increases, condominiums are in high demand.
  4. Millennials and younger generations enjoy urban living.
  5. The renter community is becoming much more accustomed to living in small areas.
  6. Condominiums often offer an array of enticing amenities that attract residents, such as a pool, a gym, and a spa.
  7. You are more liquid due to the increased demand for condo resales, which provides investors with an excellent exit option if they need to sell.
  8. Condos are often less expensive than single-family residences, lowering the barrier to entry.
  9. Typically, new condo developments feature a large deposit arrangement, so you don’t have to put down 20 percent right away.
  10. The elected condo board looks out for your interests and helps lead the day-to-day management of your complex, etc.

Condos are an excellent investment for investors seeking an entry-level investment or seasoned investors seeking to capitalize on demographic trends.

Advantages of Condo as Investing

Investing in condominiums has advantages over single-family residences. This makes them perfect for astute investors wanting a greater rate of return and simple property management. Several of these benefits include:

  1. Tenants have a sense of community.
  2. The price is less than that of single-family dwellings.
  3. Equity and tax benefits
  4. Your condo apartment can command a premium resale price or monthly rent.
  5. Due to pooled building maintenance costs, condo rentals are less expensive.
  6. Condominium regulations favor landlords and restrict tenant misconduct.
  7. Homeowner regulations also facilitate investors’ management of condominium complexes.

Disadvantages of Condo as Investments

It is also important to note that condominiums have possible disadvantages. For instance:

  1. It can be more challenging to obtain bank financing.
  2. The condominium association’s finances may be precarious.
  3. In certain markets, condos typically appreciate at a slower rate than single-family residences.

Questions to Ask Prior to Buying a Condo

Location is not the only factor to consider when purchasing a condominium. Before committing to an investment, it is prudent to ask yourself certain essential questions. Here are several:

  1. How long do you intend to retain the condominium?
  2. Is the structure you’re contemplating now involved in any litigation?
  3. What are the financing requirements of the lender?
  4. Is your apartment located in a high-demand rental region, such as near a college?
  5. Is the area you are contemplating becoming more or less popular?
  6. What is the average annual rent you may anticipate from your condominium?

Why Condos Are Outstanding Investments?

I understand that homeowner association (HOA) fees, which are normally paid on condo investments, deter most potential condo investors. Indeed, they can occasionally appear pricey. Before dismissing a condo as a poor investment, I believe it’s prudent to investigate the fees and what they cover. Included in the HOA fees for the condos in which I have invested are the following:

  1. Roofing and pool upkeep
  2. Basic cable
  3. Landscaping
  4. Garbage removal
  5. Water
  6. Exterior repairs and maintenance 
  7. Construction Insurance

In most circumstances, you would be responsible for these expenses when purchasing a single-family home. Know your rights as an investor before signing on the dotted line. The majority of rookie condo investors make mistakes that hurt them in the long run. These are errors that can be readily avoided via diligent preparation.

What Are The Different Types of Condos?

Not all condominiums are made the same. Distinct condo kinds have different rules, which may affect how you use the area. The two main types of condominiums are freehold and leasehold. Here is a look at these condos in more detail.

#1. Freehold Condos

When you buy a freehold condo, you will have full ownership of the space. Here are some details regarding the various freehold condo choices.

  1. Standard Condos (Condo Home)

Condo dwellings are another name for standard condos. In essence, this is a house, but the owner only has ownership of the interior. You would then only be the owner of the interior of your particular unit. There will be shared spaces outside your unit that all building owners can use.

  1. Vacant Land Condo

When a corporation registers and sells its land as a condominium before development starts, an empty land condo is an alternative. In this scenario, a portion of the land on which the condo is located would belong to you. But before moving in, you’ll need to wait for the developer to complete the construction of the condo.

  1. Condo corporations with a common element

Condo corporations with common elements are relatively uncommon. There are no units in this arrangement. There are merely common areas and facilities instead.

You will share in the expense of maintaining the communal areas if you purchase a property piece with an attached stake in the condo organization that manages the common elements. You are ultimately in charge of your own piece of property. Additionally, there will be maintenance charges for the communal areas.

#2. Leasehold Condos

A leasehold condo differs significantly from a freehold condo in several ways. You get into a long-term lease agreement with a landlord when you do so with a leasehold agreement. It’s important to note that this choice is one without unit ownership. Instead, you will merely be granted the authority to use the device for that time period.

Extra Condominiums Options

There are other alternatives than freehold and leasehold condominiums, which are the most typical. Here is a closer look at what the alternatives are.

#1. Separate Condo

There are no common walls between units in a detached condo. With little maintenance required, detached condo units can be built close together in planned communities.

#2. Shared Condo

A timeshare condo, commonly referred to as a condo share, provides a divided form of ownership. The property may be used by each condo share tenant for a predetermined period of time and for a predetermined number of days each year.

#3. Personal Condo

A private condominium is one that is situated on a landowner’s property. In a privately held apartment, the apartments are often rented. But compared to other kinds of apartments in the region, the application procedure and requirements could be different.

#4. Condo building

A condominium complex consists of a collection of privately owned apartments. The building is often maintained by an HOA or community property management board.

Is It Good to Invest in Condominium?

If you wish to invest in real estate, condominiums can be profitable, economical, and less stressful. They are an excellent way to enter the rental property investment market, and if done correctly, they can be quite successful.

What Are the Disadvantages of a Condo?

It is also important to note that condominiums have possible disadvantages. For instance:

  1. It can be more challenging to obtain bank financing.
  2. The condominium association’s finances may be precarious.
  3. In certain markets, condos typically appreciate at a slower rate than single-family residences.

Are Condos a Good Investment 2023?

Condos are a good investment in 2023 because the current condo market action is a precursor to what’s to come over the next few months, especially with the spring market on the horizon. Here is how to identify an amenable seller and what to watch out for in the long run.

Do Condos Appreciate or Depreciate?

Yes, condos do appreciate value. Because apart from its appreciation at a slower rate than single-family homes, condos have variables such as community facilities, property maintenance, and being pedestrian-friendly to adjacent towns and attractions that can accelerate a condo’s appreciation.

What Is the Downside of Buying a Condo?

Additionally, the expenditures connected with condo living reduce the buyer pool. The condo association may demand unaffordable maintenance fees. And the possibility that these costs will increase in the future makes acquiring a home a higher financial risk.

Is It Hard to Resell a Condo?

Even in a weak market, condos tend to sell faster than single-family homes because they are often smaller, less expensive, and require less upkeep. Don’t expect your condo will sit on the market for a long time; be prepared to move swiftly if an offer arrives.

How Long Should You Keep a Condo before Selling?

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