Greetings all. I'm extremely new to real estate investing and wanted to start out as small and safe as possible. I wanted know the communities thoughts on buying condos and renting them out as a strategy? Also, I wanted to know about buying condos in foreclosure.
Are these sound strategies?
What are some pitfalls to be aware of?
What are the best resource to research this strategy?
One thing about condos to look out for is the HOA fees and how they have been increasing in the past years. Also how much of a reserve fund is in the building. If the reserve funds is almost depleted an assessment may be asked by the owners.
Hope this helps.
Sorry came out wrong. The condo Corp will be asking the owners for a special assessment fee.
As a realtor and a landlord I own 6 rental properties and they include single family homes and condo/townhomes. The biggest challenge with single family homes is the maintenance even with landscaping services. Even with the condo fees factored into your budget it is much easier to be a condo landlord than a single family home landlord.
Condos also make better investments for ROI per month due to the lower costs yet appreciation doesn't seem to be as great as a single family home. The biggest mistake I made was buying based on price alone. One condo purchase had an incredible ROI but trying to sell it down the road was difficult. The area had become increasing less desirable and it saw little appreciation compared to other condos I had purchased.
In Florida the biggest challenge is financing on condos. You need 25 to 30% down as an investor so that eliminates many start up investors. The other thing I see happening to condos that are being bought by mostly investors is condos are not allowing a purchase and making a waiting period of a year or two to rent the condo out. They are trying to get rid of investors but in doing so with difficult condo financing buyers are finding it difficult to come up with the large down payment even as an owner occupant.
I hope that answered a few questions for you
I'm also a condo investor in south Florida. My husband and I also own 2 SFRs in NJ. We prefer the condo investments for many of the reasons @Jim McLane describes. I've owned my primary residence, a condo, for 18 years and am on the board. Get a copy of the budget and ask about any upcoming assessments or major capital expenditures before purchasing a condo (new roof, paving, replacing windows/doors, painting the complex, etc.).
If you're working with a realtor, they can find out before you make an offer about the rental policy. You can also contact the management company yourself. We paid cash for most of our condo purchases with Helocs from previous purchases. When financing, yes, 25% down for an investment property is typical.
We've also found that security is much less an issue with vacant condos than vacant SFRs, when between tenants. We lost the copper in one of our SFRs when it was vacant, and if an insurance company knows your SFR is vacant for more than 3 months, they may cancel your policy. You can also save a lot on insurance with a condo, since the master policy covers things like the roof and overall structure. We typically only purchase liability insurance for our rental condos.
I would think there are rules about whether and to whom you can let, etc., that might make it more difficult to rent a condo vs a SFR. Be sure to ask the rules about each community.
Wow! Thanks guys. This was so helpful.
Is there anything you would recommend I keep in mind when trying to buy a condo forclosure. I'm looking in Pennsylvania.
If you're financing the purchase, the lender will likely require a condo questionnaire from the board or management company. This will show how many owners are in arrears, the reserves, if there is any litigation pending, what the budget is, the ratio of renters to owner occupants, etc. Not only will this affect your ability to get financing, but it will affect others' as well when you go to sell. Unless you sell to an investor with cash.
One concern would be that, in a sense, you may be somewhat at the mercy of the condo association in some instances, like Account Closed points out above.
Another concern may be that, historically condominiums/townhomes generally see a lower rate of appreciation when compared to stand-alone, single family properties. Specific markets and opportunities vary obviously though, and many investors view appreciation as a "shaky" factor when analyzing investment properties anyway.
There are many positives as mentioned above as well though, so it is my belief that the condo/townhome strategy may be sound if you seek out and weigh the pros and cons against those of other types of investments.
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