Single Family Vs Condo

10 Replies

Just starting out and am looking at my first Investment property.

I am confused between single family homes vs a condo.

What is a better bet for a buy and hold investment and I want to rent it out. 

I want to take it as a learning experience so I was looking at low cost investments. I saw a 3 bedroom condo with 1.5 bath built in 1971 for $18k. The price seems comfortable to me. Wanted to understand more about condo buying before i spend any more focus on these kind of properties. It has a condo fee of $210 and mortgage will be less than $100, is this normal. Is the condo fee going to cover for property management and maintenance/repairs? What is this fee for.

On the other hand, could not find any SFH for this price range apart from tax foreclosures and all which I don't know if they will be a condition to rent or need a lot of work.

Any suggestions?

Hi Karan,

My personal advice is to shoot for a SFH. Condo's, although they have some perks, just don't appreciate in value as similar SFH would. Also the association fees have a tendency to seriously eat into your profits.

Though I don't know anything specific for your area the price for that condo seems a bit low to me. Granted having no experience there it could be right on par.   Either way it makes me wonder a bit.

As for the association fee they cover the amenities the facility has to offer. Unless expressed differently in the Association rules (Which you should check on) they cover only the exterior and grounds maintenance like roof, lawn, pool and some other things like a bellhop/doorman, etc.  They will NOT cover any maintenance inside the unit. When you buy a condo you purchase the unit itself and you own a share of the outside facilities.

That all being said buying a rental is all about cashflow, if you can make the numbers work for you with a good enough cushion by all means move forward. If you aren't sure on it, I'd say ease off and ask a local professional for some help if you can. Hope this helps!

@Pete Krentz stated a lot of the problems with condos (he's slightly off on what he states the condo fees cover - what he says is true for most associations but not all).

The bottom line is that - all else being equal - condos are riskier.  Depending upon their size, they are often managed by amateurs (the owners).  Your due diligence must include the financial strength of the association and a good understanding of deferred maintenance (if any) of the common elements.  You must determine if there are any special financial assessments scheduled or likely or if the association is being sued or likely to be sued.  You must learn that condo financing is less stable than that for SF.  You must determine what their rules permit in terms of rentals.  There are many other issues but you should get a sense that dealing with SF is cleaner and easier.

Thanks for the valuable replies.


I am looking for this as my first investment and am looking for a buy and hold to use it as a rental property.
The price point looks attractive to me so I am interested. I am told that it is rented at 750/month and has a condo fee of $210.
Its a 1971 building so am scared of the condition and repairs needed. Any exit strategies suggested.

Also I am being told that the seller is motivated and will compromise on the price and will cover all closing costs. So just wanted to know if it makes sense to give a low ball offer like 12-14K just to safeguard myself against the unknowns. Any ideas if a motivated seller having such an old apartment would be interested in accepting a low offer like this and if it still makes sense for me.

Also, 1 last question, can i use a self directed IRA for a buying such an apartment and how does it work. Can i just pay the 20% downpayment from my IRA and get the 80% financing from a bank/lender all within the IRA.

Thanks for helping a newbie.

@Karan Nanda

If you decide to use SD IRA to buy a property it can be used for investment purposes only, you can not gain any personal benefits from it, nor can you do any work on the property yourself.

It is possible to finance property in your IRA but you have to use non-recourse loan since providing personal guarantee is prohibited (conventional loan). Most lender will require about 40% down on such investment and will have minimum loan amount of about $50K.

Dmitriy Fomichenko, Broker
(949) 228-9393

I am currently in a Condo the Fee's are 318 a month, and Mortagage and Taxes are 1250. I can rent it for $2,100.00 a month with a cash flow of $550 a month. I am actually trying to sell get into something smarter it was my first property I put 20% down which is a big chunk of change that I could be on something bigger for a lower down payment.

Originally posted by @Karan Nanda :

Thanks for the valuable replies.


I am looking for this as my first investment and am looking for a buy and hold to use it as a rental property.
The price point looks attractive to me so I am interested. I am told that it is rented at 750/month and has a condo fee of $210.
Its a 1971 building so am scared of the condition and repairs needed. Any exit strategies suggested.

Also I am being told that the seller is motivated and will compromise on the price and will cover all closing costs. So just wanted to know if it makes sense to give a low ball offer like 12-14K just to safeguard myself against the unknowns. Any ideas if a motivated seller having such an old apartment would be interested in accepting a low offer like this and if it still makes sense for me.

Also, 1 last question, can i use a self directed IRA for a buying such an apartment and how does it work. Can i just pay the 20% downpayment from my IRA and get the 80% financing from a bank/lender all within the IRA.

Thanks for helping a newbie.

 From what you are describing it sounds like a condo that may have been turned into section 8. We have one here and you can buy them for about 22k each. There are some good renters in there but there are also some that have been arrested for cooking meth in them. The good renters don't stay long. 

Be careful. I just don't see buying a condo for less than the price of a kitchen remodel. If he is making 750 month minus HOA fees why is he selling?

I lived in condos and once had several condo rentals. I stay away from condos as rentals for these reasons:

First, they usually want to keep the NOO percentage below 20%. If it gets beyond that, future buyers may have trouble getting mortgages. Also, if you bought it as owner occupied, had a job offer, had to relocate, want to keep it as a rental, the HOA is not obligated to grant the approval for you to rent.

Second, which caused me to sell mine, but I already made money on the appreciation, they must approve tenants I rent to. It was a new requirement after 10 years. I've been in the rental business for 35 years, I got many tenants the condo owner wants to rent to, the HOA rejected them, or waited too long for the next board to review them, and the owner has to start looking all over again. To me, any prolonged vacancy will cost me money that I can't afford.

Third, I lived in a complex with cheapo owners, and one year they have to collect a special assessment to keep the utilities on, because they were months behind.

Condos can be such a wild card. I would try SFH to be safe. if not, check HOAs financials, what they actually cover vs charge (this will def effect capex). Remember, they do not appreciate as well as SFH either. I bought a condo to live in and HOA has been pretty bad. They have raised it twice (and still have no money in the account) and they don't cover much. For me, I like water/trash, exterior and ROOF.

Typically SFH will appreciate much faster than a condo. So if you are counting on appreciation besides the cash flow you should probably go with SFH.

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