Condo Investing| Your thoughts?

Question

Hey guys! I’m on the fences about starting out with my first investment property as a condo or SFR. I know the HOA fees can eat into your cash flow in some case, but I also know it saves you on cap x due to the fact your not having to deal with roof repairs and things of that nature. Has anyone invested in condos and if so how was/is the experience?

Matt "Roar" Gardner · Answer

@Wayland Sejour - You can definitely make condos work as an investment, especially if they are run well.  @Stone Saathoff had a great example of solid appreciation, and I would venture to guess consistent cash flow as well.

I am a Realtor and Investor in the Destin, FL market.  I own a SFR and a Condo in the STR space (both of which have HOAs/COAs).  You simply assess it as any other property based on expected expenses, short and long term.  The biggest unknown with any HOA/COA is the dreaded Special Assessment. In Florida before you buy a condo, it is a requirement for you to have access to the declaration of condominium, articles of incorporation, bylaws and rules, a copy of the most recent year-end financial information, frequently asked questions and answers document, and any other pertinent condo docs.  You can have a professional management company or CPA go over those docs with you to help assess the 'health' of the HOA.

As far as association dues, they vary wildly in both cost and what they provide.  My SFR HOA charges about $460/mo, but we get a gated community, massive resort-style pool, shuttle service that takes my guests directly from my door to the beach, and plenty of other perks.  In some condos, it's common to have almost all of your recurring expenses covered (i.e. water, electricity, TV, internet, garbage, etc.).  Just don't lull yourself into thinking that you don't have to save for any CapEx --- that will bite you in the end.

Best of luck!

Kevin Paglia · Answer

@Wayland Sejour I have been thinking about the townhouse/condo route as well.  In this area I can find them cheap that need repairs and rent them for a profit, I hope.  Still need to make my first investment.  All that said, One of the quadplexes I was excited about had HOA fees that were a couple hundred MORE than the mortgage would have been.

Stone Saathoff · Answer

My grandparents bought several condos in Destin, FL back in the 90's before things really blew up there. Ended up being a fantastic investment for them. They used them as vacation rentals when they didn't stay there, and also a bit of a second home to vacation themselves during the off season. The appreciation has been huge. It depends on the area and what your strategy is but townhomes and condos can certainly be a viable investment.

Evan Stuber · Answer

I've made offers on condos with good numbers down here in South Florida. The numbers can work. Especially when insurance on condos is sooooo much lower. Just be sure to see how much the HOA has in reserves, try to find out if any assessments are coming up, and of course make sure renting is allowed. If you're just starting out, you can also house-hack a condo with roommates.

Account Closed · Answer

Low vacancies are key to condo-investing. Otherwise HOA fees will eat up any profitability.

Sid K. · Answer

I think i answered a similar question yesterday. I have 10 doors, 3 of which are condos. I think condos have a place in a portfolio, especially a community with a financially strong and efficient HOA. Yes you dilute NOI , and lose some control , but it also offers limited capex , lower maintenance hassles and lower cost of acquisition as compared to SFH.

Avery Carl · Answer

I have never invested in a condo, but in the right market, I would consider it. Only in a beach market, and only as an STR. I'd never bother with it as an LTR unless the numbers were KILLER. Condo fees can be high, but many of them include some utilities and/or amenities, which can make them worth it. The downside is assessments. All that to say, it can be a great option as an STR in a vacation rental market.

Dave Rav · Answer

Disclaimer:  I've never invested in condos.

However, in most cases you could say I am not interested in doing so.  I HAVE been a part of dozens of transactions and in my experience, I can always locate better value when it comes to repairs compared to any 3rd party (HOA, regime, or insurance company).  Also, if the property is newer, the capex on both roof, HVAC, and pretty much all exteriors of home is a non-factor for nearly a decade (if say the property was built in '19).  So, with regime fees you're basically paying for unnecessary "insurance" if you will.

Condo Investing| Your thoughts?

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