anyone invest in condos ? Pro's & CON'S?
Yes, I lived in and rented out condos. There are pros and cons and for me and the cons outnumber the pros.
It's true that in many cases, they are cheaper. But the condo I lived in the electric for the common area and heat and cooking gas is a common utility paid via common charges. The condo is inhabited mostly by young professionals, and collecting common charges to pay bills is a challenge. There were no reserves. We had emergency meetings when they announced special assessments had to be made to pay past due utility bills before they were cut off.
As to rental condos, the HOA have to approve it as a rental condo, the total no more than 20% of the total units. So far so good. A few years later they announced they have to approve tenants and the leases. This I know would create a cash flow problem, because in NYC where I am, I over the years rented to many tenants who got tired of waiting for HOA approvals, both condo and coops that they rented from me instead. I try to keep vacancies to 30 days or less, and depending on the good mood of the HOA does not give me that assurance.
I did OK with the condos though, bought them for $40K and sold them for close to $100K. I held it for 10 years before they sprang the new rules on me, so I figured it's the right time to sell, while I'm still ahead.
Hi @Sheldon Whalen ,
They are fantastic investments, and I currently own 2, but, you must understand how they work, and understand how they fit into a portfolio. They are typically a hands off investment that is really good as reasonable cash flow returns. The great ones that get you cash flow, with a healthy reserves, well maintained and promote appreciation are hard to find, or more than you want to spend.
The cons are:
-The HOA fee takes your cash flow. However, you do get amenities that you can offer your tenants in return, as well as saves you money on maintenance.
-The HOA can be organized poorly (which can be figured out quickly before you buy it) and not be Fannie Mae approved, making it harder to turnover, which reduces your ability for appreciation.
-There can be assessments or higher fees. This can be mitigated by doing homework in your due diligence period. Pay for a condo questionnaire, get the budget, ask for the last 12 months of board minutes. If there's an assessment or litigation, the budget, the questionnaire and the minutes will talk about it.
-The HOA may control who you can rent to. But that's not a bad thing, they do the same background checks you do before renting to someone.
The Pros are: they rent quicker(at least in my market), offer amenities like fitness centers, pools, security guards, secure parking etc, low maintenance since you own from drywall in, you don't have to pay to cut grass, paint the exterior, replace the roof, cheaper insurance, not as many tenants to do too much damage to your property.
I could write a book on how to avoid the potential downfalls of a condo, and give examples of all the pros, but above is a good synopsis.