Would You buy a Condo and rent it?

[Edwin Lopez]

Hello everyone!

I need advice, would you buy a condo and rent it out? My numbers are good as far as ROI. However do condos also have equity that rise like a single family home?

[Jason Brown]

Quote from @Greg M.:

It blows my mind that people talk about HOA Dues and Special Assessments like they do.

"I'd never buy a condo. What if there is a... SPECIAL ASSESSMENT!!! (dun, dun, dun, duuuun)." As if owning a SFR magically makes you immune to sudden large costs.

Or, "I'd never buy a condo. The HOA dues will only go up!" I can only guess that these people live in some bizarro world where things like maintenance and repairs get cheaper each year with SFR.

Dues pay for things like insurance, landscaping, pool guy, water, etc. Splitting this cost among all homeowners is usually cheaper for you than paying individually. And it's not like if you owned a SFR you wouldn't have these costs.

And special assessments usually pay for large projects. I'd much rather split the cost of a sewer replacement with 50 other homeowners than all by myself for a SFR.

The key to owning a condo is whether it has a well run HOA. If they are, it can be awesome. If not, it can be hell.

 I wish I could triple like this post. I honestly don't understand people's absolute hatred for condos. I think its got to be wrapped up in this super independent wild west frontier ideology about no one telling you what to do regardless of whether or not what's being done/told is actually great. 

Let's be clear. Bad HOAs suck. They waste money, they defer maintenance, and levy special assessments so frequently that they would probably be better off dropping the "special" and just calling them yearly assessments. They can also really hassle you and be a stickler to rules that you personally may not deem important.

HOWEVER a good HOA is amazing. A good HOA can be a de facto property manager if leveraged correctly. A good HOA is a preventive maintenance expert. A good HOA leverages their scale to get solid and reliable vendors. A good HOA is not Karen and 3 other board members looking for vendors on Yelp and sorting by most reviews all the while managing their other 9-5 jobs.

Just check the budgets. The biggest expense you'll find on there is insurance. Insurance you were going to have to pay regardless. Now you've got a walls in policy for a fraction of the total cost because the rest is covered by your HOA dues. Think guys. The dues pay for STUFF! Insurance, maintenance, capex, reserves. All real stuff. In my HOA budget you can see the useful life of all major components and the current capex saved up for each one and know when exactly they will be replaced. From roofs to painting. Could you do all of this yourself? Sure. Me however I'll pass. I'm too busy doing marketing looking for my next condo to buy.

Tenants appreciate landlords who fix things when they break. Great tenants respect landlords who KEEP UP a property and service them routinely so they don't break at all.

[Jay Hurst]

Quote from @Jason Brown:

Quote from @Greg M.:

It blows my mind that people talk about HOA Dues and Special Assessments like they do.

"I'd never buy a condo. What if there is a... SPECIAL ASSESSMENT!!! (dun, dun, dun, duuuun)." As if owning a SFR magically makes you immune to sudden large costs.

Or, "I'd never buy a condo. The HOA dues will only go up!" I can only guess that these people live in some bizarro world where things like maintenance and repairs get cheaper each year with SFR.

Dues pay for things like insurance, landscaping, pool guy, water, etc. Splitting this cost among all homeowners is usually cheaper for you than paying individually. And it's not like if you owned a SFR you wouldn't have these costs.

And special assessments usually pay for large projects. I'd much rather split the cost of a sewer replacement with 50 other homeowners than all by myself for a SFR.

The key to owning a condo is whether it has a well run HOA. If they are, it can be awesome. If not, it can be hell.

 I wish I could triple like this post. I honestly don't understand people's absolute hatred for condos. I think its got to be wrapped up in this super independent wild west frontier ideology about no one telling you what to do regardless of whether or not what's being done/told is actually great. 

Let's be clear. Bad HOAs suck. They waste money, they defer maintenance, and levy special assessments so frequently that they would probably be better off dropping the "special" and just calling them yearly assessments. They can also really hassle you and be a stickler to rules that you personally may not deem important.

HOWEVER a good HOA is amazing. A good HOA can be a de facto property manager if leveraged correctly. A good HOA is a preventive maintenance expert. A good HOA leverages their scale to get solid and reliable vendors. A good HOA is not Karen and 3 other board members looking for vendors on Yelp and sorting by most reviews all the while managing their other 9-5 jobs.

Just check the budgets. The biggest expense you'll find on there is insurance. Insurance you were going to have to pay regardless. Now you've got a walls in policy for a fraction of the total cost because the rest is covered by your HOA dues. Think guys. The dues pay for STUFF! Insurance, maintenance, capex, reserves. All real stuff. In my HOA budget you can see the useful life of all major components and the current capex saved up for each one and know when exactly they will be replaced. From roofs to painting. Could you do all of this yourself? Sure. Me however I'll pass. I'm too busy doing marketing looking for my next condo to buy.

Tenants appreciate landlords who fix things when they break. Great tenants respect landlords who KEEP UP a property and service them routinely so they don't break at all.

I think the market matters as well when it comes to Condo's.  The south Florida market is condo heavy. There are a lot of projects therefor a large buyer base for those units.  NYC obviously, and all of the large north east metro's.  But, in a lot of the south, midwest, and west outside of the  dense city centers land is relatively cheap. Therefore single family homes are the vast majority of the market so there is just less of a buyer base for condo projects. So, condo's can be a great investment in one market while being a lousy one in an another market. 

[Yoe Lopez]

I would definitely do it!(at least here in New Jersey)

I have several clients who own 2 or more condos and it's definitely worth it for them, here is why;

1. Appreciation: One of my clients bought their first unit in 2014, they paid $115,000. Today that one is worth $210,000 conservative! they also bought another one in 2019 for 180,000 which is also worth 210k to 215k. Talk about ROI!

2. Excellent Cash flow. The fact that someone is paying your mortgage and that rental demand is increasing is just so awesome. Rent prices have gone through the roofs, going up at least 10% every year for the last 3 years which defeat inflation.

3.Lower Down payment: Here in New Jersey, a Multi-Family or Multi-Unit or even a House has become very expensive. An apartment has become an alternative solution when money for the down payment is an issue.

4. Hands-free Maintenance: The fact that you don't have to worry about taking care of the nuisances of the day to day operation is gold. No shoveling the snow!   

5. Your own Buyer's Farm: This concept was introduced to me  by one of my higher end investors. If you are a Flipper and you do right by your tenants, what are the chances of one of your tenants buying one of your flips directly from you when they are ready to move?

I joined this group because I'm planning to buy a couple of units myself so yeah it is Worth it!!!   

[Mary L.]

@Yoe Lopez

I know two other condo investors in Las Vegas.

One investor owns about 130 condo, the other one own about 80 condos, and I own about 50 condos in Vegas.

Why own double and triple digit condos?

Because the numbers does work.

[John Mocker]

Edwin,

If you do purchase a condo unit, the Insurance on it is different than a stand alone home.  The Assocation owns and insures parts of the building and you own and insured parts.  Who owns what is normally spelled out in the Condo Bylaws and Declarations.  In there is a descritpion of the unit which details where your unit begins (could be at the studs/you own the sheet rock, could be walls in/association owns the sheet rock,....).  Those documents should also show what are the common elements (usually insured by the condo assocation) and what are the Limited common elements (service one or more units but not all - who insures them is usually also defined).  There are also state laws that may impact the coverage. 

You need to know what you own to make sure you have enough coverage under your policy.  If an agent suggests a limit for the parts you own (called Impovements & Betterments or Additions & Alterations in insurance speak), ask them how they determined it to make sure they know what they are talking about. 

[Roi Ford]

I have been involved in over 400 transactions in my career.  Either my own, or for a client.  I have worked with multiple investors over the years, and read book after book.  And... the real players, the investors who fix, and flip, buy and hold, house hack, etc, strictly go by the numbers.  The numbers are the determining factor for all of their investments.    

Condo's are like any other investment, they can and do increase in value over the years, as well as equity. The only issue I've seen here in Las Vegas, is the HOA monthly dues. As you can imagine, Las Vegas is riddled with condo developments, which include high-rise, low-rise, high-end, and entry level properties.

Some of the HOA fee's can be upwards of $1500 per month for a high-end condo in a high-rise development. On the lower end I've seen these fee's as low as $150 per month. Whatever the case, if you are not able to charge a high enough rent to cash flow then like any other property, its a bad investment.

But you mentioned that your numbers are good as far as you're ROI, so I would go for it.