BiggerPockets

I'm curious what other buy and hold investors think about condo rentals in good areas vs. 2-4 units in worse areas of San Diego CA. What would you rather have? Cash flow would probably be slightly better on the units in the worse areas. But tenants likely better in the condos in the better areas.

Thanks. Those are good points about condos. Although I have never seen a condo project where they restrict renting and I have looked at hundreds of CC&R's. That is more of a myth than reality IMO, 99% of CC&R's don't restrict renting of units & you'll know that by reading them before you buy.

Hoa due rises are a risk. But you can also run your numbers going into it and see if it would still be good cash flow if hoa dues went up $100-$200/mo. Most will not rise more than that much over a 10 year period. I have also known lots of condo projects to not have had a special assessment in over 20 yrs.

Condos prices are also more depressed in price right now than SFR's or units b/c of the financing issues associated with them. As the housing market stabilizes the lenders will get more aggressive with condo financing IMO.

Also I see you are Utah. I think the condo dynamics are different in places like Utah vs. say Coastal CA, Seattle, Boston, etc... In expensive areas, condos become the defacto first time home buyer home of choice because SFR's are so out of reach price wise. I would never buy condos in a place like Utah or in the Midwest because SFR's are so comparably affordable, first time home buyers in those areas still will always buy SFR's. SFR's are not comparably affordable in Coastal CA or say Boston.

I've started buying more condos. Nathan's comments cover my reasons for concern. I ultimately decided that the return on my condos is worth the risk. I am in the DC market so that may make a difference. First, I am able to buy at less than 30% of tax assessed value. Second, my rehab is generally painting and cleaning. In my area there are no condo communities that meet the FHA requirements (unfortunate but true). Regarding owner occupancy limits, I am going in as an investor. If there is a limit on investors in the bylaws, I don't buy. If a subsequent owner occupancy bylaw is proposed, I make it clear that I want to be grandfathered in. Regarding tenants, I have class A, B, and C properties. I've had great tenants in my class C and not so great in my class A and vice versa. I think that success with tenants is careful screening and clearly defined expectations. I've learned the hard way, but . . . I have learned.

In my condos, the first person who walks in fills out an application and generally becomes the new tenant. The second person who comes in, usually fills out an application as a back up.

My apartments also rent quickly (the best school in the city is across the street) but have more turnover than the condos. My single family houses have the greatest maintenance expense but the least turnover.

Thanks Rich for your excellent comments. But one thing to point out... you do have hoa dues on condos and you may or may not have a special assessment every 5-10 yrs. But condos you will never have to pay out of your pocket to:
-replace the roof
-paint the exterior
-keep up the landscaping

....units you will have to pay for all this.

Also, water/garbage bill is included in the hoa with condos where you have to pay that with units. And the hoa polices the area (doesn't allow large dogs, or people to park a ton of cars & keep junk around like they will on units).

I do myself personally live in a condo right now.

But I hear you on units, I do like them better all things being equal. But in my area they are in so much worse areas of town than condos for similar price per door. I would personally live where I invest in condos, I would not personally live where I would buy units. So guess there is just a safety factor for me because I know what the tenant will be like since I have rented in these areas myself.

Some of the worst nightmare stories I've heard form long term investors I know (that favor SFR's now) are from 4-plex's they owned in bad parts of San Bernardino CA on blocks with mostly apartments. They all said it was a nightmare management situation with endless turnover, drug activity, etc... And they sucked up so much of their time and energy that they vowed to never buy anything but single families homes again.

Rich...Florida is also ground zero for a massive over supply of condos. San Diego doesn't have near the over supply problem of FL & it's harder to add more supply here. In fact supply is very tight here right now and I'm starting to kick myself for not buying a condo a could of had for $100k last year that is now $130k!

Rob - I have a saying I'm going to use quite a bit in my presentation at the BP seminar in Denver: "widen your horizons and expand your vision". In your case, it might mean to look outside of your area to areas that are more median price type areas. I can see you are sold on condos so I will bow out of this thread now. Good luck. Rich

Rob, here are some blog entries by Jeff Brown on investing in San Diego vs. other places. I know he also likes duplexes better than condos.

http://bawldguy.com/category/san-diego-property-owners/

Jeff is speaking at the summit in Denver. Are you coming?

Jesse...I would NOT be buying condos in Vegas or Phoenix...ONLY SFR's out of state for sure. The only condos I would buy would be good areas of San Diego.