I am about to buy another property here in San Diego. I currently have 3 SFRs (including my primary) and I am taking equity out of one of them (~$60k) to put down on the new place. Right now, my plan is to stick with another SFR, but I've seen many more condos for sale below my budget in nice areas of town that seem to be collecting some nice rents.
I wanted to see what you all thought about getting a condo rather than another SFR.
Thanks in advance!
Some people would say, that if the numbers work, it shouldn't matter. I personally am not a fan of HOAs. There are too many bylaws telling me what I can and can't do with the property. There are also advantages because they maintain the exterior. Lots of pros and cons to outweigh. I think the "control freak" in me would trade off the exterior maintenance for the freedom of no HOA. But again, that is just me. Good luck with whichever you choose.
I currently have two condos in my portfolio, one in VA and one in HI. I purchased the VA one already rented, at a discount, and the HI I lived in while stationed there.
I have had the VA condo for almost ten years now, and while it has only gained some 50% in equity I have consistently increased rents and have very little vacancy loss. While I am only at 200 cashflow right now I know the only large CAPEX is the A/C which was replaced a few years back. Technically the HOA is my CAPEX though. The HI condo is very similar.
What I do like is that, though they are both far away, I know that the common area maintenance and such is taken care of. While both PM's are great its an additional level of assurance the place is taken care of.
The converse is that buying a condo does not, in my mind, leave as much room for improvement. My San Diego holdings are all SFR's for that reason.
As with any investment if you account for all the numbers and they work for your investment plan then go for it.
Wish you success on your next investment either way!
I bought 2 condos 2-3 years ago when things were really depressed in San Diego. I stopped because prices started going up and things were getting competitive. Both condos have gone up around 100K since then in appreciation and I have also gotten the cash flow on top of that. I got on the Board of the HOA and saw they were doing a good job. I think if you are happy with a low cap rate then condos are fine but now after prices have gone up so much I wouldn't continue to invest here. I am too busy with the day job but if I had the time I would invest out of the area. Just my thoughts.
HOA's are almost everywhere these days. It's been a long time since I've seen any property newer than 2000 in a developed area that doesn't carry an HOA.
I think HOA's are acceptable as long as they are in the $100 - $150 range (meaning SFR). Anything above that could start significantly (and permanently) impacting your monthly net (reducing your returns), and will accumulate quickly if you plan to keep the property for a long time.
Most Condo HOAs are well-over $300/month because there is more common area and possibly a gate, but if you can translate those amenities into a $300+ increase in monthly rent, relative to a nearby SFR, then I guess it's not that bad.
My dislike of HOAs is because they don't go away and the costs aren't tax deductible. Excluding the Debt Service, HOAs are easily the biggest recurring monthly cost that you'll have. You have to pay it and as long as you own it, you can't get away from it.
I personally have two houses in hoas although they are townhouse. As an out of state investor they are an absolute pain in my side! Some times I would go further and say they are the bane of my existence. So if you had the house I would stay far far away from condos! There restrictions are ridiculous. Price increase and even rule change are hard to control. Single family homes also appreciate much better!
I don't invest in condos. I don't like other parties (condo board/HOA) having control of my cash flow stream. That said, I do invest in SFR that have HOA with nominal (~$100 per year) HOA fees. It keeps residents lawns manicured and prevents them from parking on the lawn, leaving junk cars in front of the house, etc...
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