Thinking of starting with a condominium

8 Replies

@Cortez Dameron

ah.. i see.  using an equity line against your primary residence is cheap money.  many people do go that route to fund other projects.  there is really no way to know what the future holds in general though.  i will also say that lending now may very well change in 2-3 years.  i remember before the market crashed years ago.. i had a property that i was going to refinance.  the market then crashed, and i almost lost the property because the banks tightened up on giving out loans, and i had a balloon payment due.     i think lenders will usually lend about 75-80% on refi or equity loan.  

adam

I think Condos are a good place to live if you have the HOA fees (which always go up) . My friend had a condo almost paid off decided to move to a new location, tried renting it out instead of selling couldn't get a renter to pay what she needed to keep it. Put in on the market and was there for 2 years before it moved, she lost a ton.

It seems like most people on BP don't like condos. I started with condos and own a few. Here are some good and bad things about this.

In my market real estate is so expensive it's very hard to make things cash flow. Condos haven't appreciated as much, so it was easier to make them cash flow, even with their high HOA fees. Your mileage will obviously vary, just don't forget to count the HOA fees in your calculations. For example the 1% rule becomes to 1+HOA% rule.

Vacancy is a bigger deal because you're paying HOA fees. How long will it take you to get the place ready to rent? If it will take 3 months, it will take 3 months of HOA fees too.

While they cash flowed better on paper, smaller units are the hardest things to rent out. Don't fall for cheap 1 bedroom units like I did. Except near universities no one wants to rent those.

You will have much lower capex - there's no roof, no foundation, no gutters, no hot water heater, etc. I know a lot of working professionals that only do condos for this reason - they just don't have time to deal with the increased aggravation of a house.

@Cortez Dameron Totally agree with @Ari Bachrach  . If you're planning on starting with condos or smaller units, you're better off investing in places near universities or with a high demographic of young people. College students and recent graduates seem to be the only group looking to rent small condos or apartments, considering the cheaper cost of rent and the fact that they typically live alone, not having settled down or started a family.

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