Are Condos a Good Investment Decision?

Question

A close relative currently lives in one of my investment properties but is looking to move in a month or so to be closer to her new job.  Her credit isn't in a position to allow her to buy or even rent an apartment without having to pay a very large deposit which most require.  [In comes the REI]  She wants to live in a Condo so that she's only responsible for the inside of the home and not the grass, pool, etc.  I'd be willing to Seller Finance it for her but I'm not sure if Condos are a good investment.  I would look to BRRRR the property but I'm very concerned about rising HOA costs and minimal appreciation on condos (in relation to stick built homes.)  Should I consider the condo and simply "buy right" or should I lean towards a stick-built home and use a PM to handle the stuff she doesn't want to do?

Mike Collier · Answer

Adam Bartomeo I love your passion! Haha. Thank you. You're saying what I was already thinking as well. I told my wife just yesterday that I'll look to invest a bit more a buy duplex instead. That way I can hedge against the downside (if things went sour with the family member) and still have the other side rented PLUS have a better overall investment.

Account Closed · Answer

Hello @Mike Collier

This is a question we get a lot. Yes, condo can be a good investment if the numbers work. However, the added cost of HOA does making reaching desired numbers more challenging in some cases.

Mike Collier · Answer

That makes a lot of sense. Flips yes...Rental I think not. Thanks for your feedback.

Adam Bartomeo · Answer

Never...

Never, never, never, buy a property for a family or friend no matter the deal!

Buy a property for the investment and if you choose to rent it or seller finance it to them. If things go side ways or you choose to part ways then you have a good investment. Do not let them dictate your investment strategy.

Also, in my opinion condos are an awful investment for a host of reasons. You can probably look up 1,000 threads on that.

John Thedford · Answer

Many people may differ but personally I don't care for condos. As others stated, they are pretty loose spending YOUR money. Add in the fact they can change rules, deny rentals, etc and it just isn't attractive. Also, I just showed an attached villa in an HOA. The HOA instituted new rules --NO RENTALS. The villa I showed was on the market because the owner had been using it as a rental and then the HOA changed the game. The ONLY time I invest in condos is to flip them. Rentals? No thanks.

Mike Collier · Answer

@Walter Key and @Kris Haskins That is where my biggest concern lies.  I've owned a condo as a primary residence here in Florida and have seen assessments and increases on them faster than I would be able to raise rents.  And yes Kris, I remember now that there has to be a specific mix OO units and rental units.  Thank you both for your feedback.

Kris Haskins · Answer

oh my.  i have a condo and fees keep going up.     not to mention the special assessment fee when the hoa spend hundreds of thousands to do a major repair then splits the bill up amongst the owners.  oh and i just received a letter stating our rental cap has been met and we cant hv any more rentals and i may be forced to move my tenant out for breaking rental cap policy....   enjoy the headache!!

Walter Key · Answer

@Mike Collier I don't think long term appreciation is your biggest concern, especially in Florida where the idea of a condo is pretty common and familiar. However, the rising condo fees can really eat away at your bottom line when you're looking at rental options. It's not necessarily a "bad investment". You just really have to run the numbers well to make sure you've accounted for the fees and expenses properly is your analysis of the deal.