My name is Phil, a real estate investor in the Chicago/Central Illinois area. I am relatively new to BP but have already learned a ton from the forums and podcasts. I am considering purchasing a condo in central Illinois to use for long term rental income. Are there any disadvantages to purchasing a condo instead of a house aside from the HOA dues (FYI HOA dues in this case only cover snow and lawn maintenance)? Additionally are there any benefits?
Any advice is much appreciated.
@Philip Adeleye , be really careful with condos.
I have a condo that is held as a rental, but only because I previously lived in it and it is upside down. It loses some money each month and that's before any big maintenance items.
Now, if you purchase correctly, there is no reason you can't find a condo that will cash flow and that's a big benefit: they should be cheaper than a similar SFR.
The HOA and associated dues is the big unknown. I doubt the dues you are talking about are only for snow and lawn... usually there is some building maintenance, common area upkeep etc. And that's where you can run into trouble. If the HOA is poorly managed or someone on the condo board has a "great idea" for a new project, then there could be unforseen expenses that will automatically get passed on to all owners and the dues can go up substantially, cutting into or eliminating any cashflow.
I have also seen discussions here on BP about condo communities limiting the percentage of units that can be rentals.
So, make sure the numbers are really good so you have room to keep some cashflow if things change.
I'd have an exit strategy. Have doubled my money but the management companies can drive you crazy.
Thanks everyone for all the advice. For now, I think i'll stick to single family properties. I'd rather avoid the restrictions and unknowns of dealing with an HOA.
I purchased a high-end condo unit pre-sale from a well-known, and respected developer. With pooled investor funds, combined with my own, all of us should profit very well for many years to come, and that is with significantly underestimating revenue while also overestimating both known and unexpected expenses.
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