Mortgages & Creative Financing

Should Investors Stay Away from Condos

28 Articles Written

As real estate prices continue to slide investors are eager to find the next best deal. Usually when determining which property they should buy price and rental income become a big factor. Price and rental income usually translate to cash flow and this is the foundation of long term real estate investing.

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Let’s look at the condo market and the pro and cons of buying them over other real estate options. The price point of a condo can be very low and investors can usually cash flow on them, but one area that needs consideration is the short term exit strategy. If an investor wants to sell their investment condo they should think about who is going to buy it and what loans are available to buyer to finance them.

Loans on condos are still available, but guidelines have changed that make it more difficult to finance condos with little or no money down. Condos as an affordable housing option for low and middle income brackets are great because of the low price, but a large group of these borrowers need low to no money down on their purchases. Many loans require 10% or more depending on the geographic region, borrower and the type of condo that is being financed.

Here are a few key questions to ask your mortgage professional in helping you with your exit strategy:

  1. Is this condo FHA eligible?
  2. Is this a warrantable condo?
  3. Is this a non-warrantable condo?
  4. Is this an ineligible condo?
  5. Does one investor own more than 10% of the complex?

All of these questions relate to whether or not a bank will actually be able to finance your property and some have a higher down payment requirement.

Investors do you home work up front, have a well formulated exit strategy and anticipate the hurdles that your potential future buyer may have to over come.

    Replied over 11 years ago
    Personally, I am staying away from condos right now. I have better use for my working capital than condo fees, I don’t usually rent but it’s even becoming harder to do that after purchase.
    Replied over 11 years ago
    Personally, I am staying away from condos right now. I have better use for my working capital than condo fees, I don’t usually rent but it’s even becoming harder to do that after purchase.
    Reverse Mergers
    Replied over 11 years ago
    Thank you for the article. I agree, there is just too big risk recently in investing real estate.
    Colin Stafford
    Replied over 11 years ago
    We are advising clients to focus on single family homes, unless they have 100% finance already, simply because condo financing is so unpredictable (and difficult to find!).
    Replied over 11 years ago
    It is important to consider the buyers being able to get financing if you are looking to sell it in the next few years – though it is always possible to finance them yourselves if you are able to.
    Wendy Polisi
    Replied over 11 years ago
    I would not personally invest in condo’s right now, nor would I advise a client to. They are quite simply to unpredictable, and there is such an abundance of real estate to choose from right now. It is an unnecessary risk.
    Claire, staff
    Replied over 11 years ago
    The question for all real estate investors is this: How can you get the property sold without going bankrupt in the process? Ilyce joined the masses and invested in a beautiful condo in 2004. Now that the market has changed dramatically, she provides you with tips for getting the most for your investment property. To read all of her tips on condo investment follow the link below to the full article on
    Replied over 11 years ago
    It depends on the location and price of the condo, also what is going on in that particular area, again location and market. Another big consideration is how long you will hang onto the property and can it be easily rented.
    Replied almost 11 years ago
    You have to look at the demographics. For instance we have a large group of people retiring and moving to our area. It’s a good bet that a large segment are going to want a condo. – However – I personally will stay away from anything over 15 years old. Just superstition. Ha old.
    Jay Castillo
    Replied over 10 years ago
    I’m just glad that so far, investing in condos here in the Philippines is still very similar to investing in single family homes as financing for both types of properties are easy to secure from banks. Buyers are still quite easy to find. .-= Jay Castillo´s last blog ..UCPB repossessed cars for sale =-.
    Rebecca Ramos Realtor from MD
    Replied over 1 year ago
    Hi, I’m a new RE Investor with a question about Condos as investment properties. Are they still a bad idea as an investment for a newbie? I live in the DC, Maryland, Virginia area where Condos and their fees are very high. Any suggestions or recommendations? Thank you very much.
    Dwight Gholson New to Real Estate from Washington DC
    Replied over 1 year ago
    I am a new investor myself in the DC area trying to figure out this condo question myself. I have some across a lot of good deal condo prices, but since they are old apartment complexes they have condo fees of $3-500 that include a pool, gym, and utilities. I am not sure how marketable, and how many people would be scared away from purchasing a renovated condo once they see how much the condo fees are.