Condos a good idea?

Question

Walt Payne · Answer

@Drew Denham some have done well with them, I have seen too many issues with bad condo associations and HOAs. Even if they are good now, it just takes one new member with an agenda. Or one poorly run maintenance budget to require a huge assessment. Just my personal opinion and prejudice.

Aaron G. · Answer

I hate having to deal with the HOA for my mothers condo.  It would be a factor in my decision.

Ali Boone · Answer

Condos are fine as long as you can cash flow on them. Those condo fees are usually the issue. It's not worth having the benefit of condo fees if you aren't making any money on the property, or worse, having to pay out on it every month.

Just be sure to run your numbers thoroughly!

Pete T. · Answer

it just takes one new member with an agenda.

Exactly- not completely against it, but always weighs heavily w/ so much not in your control

Emily B. · Answer

Thanks, @Raymond B.  I appreciate it. Wasn't sure if it was best to mention someone or not if they started the thread. Assumed they would get a reply notification.

Raymond B. · Answer

@Emily Brozovic

I'll summon @Drew Denham for you. Hopefully he will answer your question.

Raymond

Emily B. · Answer

Drew,

I was wondering if you ever followed through with a condo? I have been considering the same lately as they seem to have a lower entry price than other properties, but I do need to research the fees a bit more. Would love to know about your experience if you did!

Tom Shilakes · Answer

Drew,

My wife and I are relatively new investors in the SE Michigan area and have two condos that we are renting successfully.  We chose condos because it reduces certain upkeep and maintenance expenses and we like having potentially catastrophic issues (roof, etc) covered by the HOA as Stephen E mentioned.

Ali is right though, it's definitely harder to cashflow them.  HOA fees grab up over half of our income.  We have focused on newer condos to both increase desirability and reduce maintenance costs.  This has increased our cashflow.

Another suggestion I have is reading the HOA bylaws thoroughly before you purchase because I've read here on BP that some HOA's forbid using their condos as rentals.

Condos might not be for everyone, but they work for us and for the right price, could for you as well.  Good luck!

Stephen E. · Answer

I just invest in condos. Some people will argue against being put off by condo fees but in my mind these are a proxy for the cash flow shocks you would experience managing a single family home, duplex or similar. What if the roof goes? With a condo you have a decent chance of being covered. Also an overlooked fact is that rental property needs to be cheap property. Most renters can't afford the Ritz. Condos are cheaper and can be rented for less. That opens up a lot more of the rental market to you. Finally you can own more condos and diversify your risk better through owning units in multiple condo developments. This is useful and further insulates you from cash flow shocks. If one were to have a special assessment that would be unfortunate but not a disaster as you would have the others going as normal, with rent paying down the mortgage and all going as it should.

Hope this helps.

Condos a good idea?

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