I know, I know, "hate" is a pretty strong word, but it's true, I hate condo's as rentals. I reluctantly bought a REO condo 3 1/2 years ago and had it as a rental up until last week when I sold it and I couldn't have been happier to get rid of it! Here is my reasoning: It's all about the lack of control and being subject to the HOA. They can dictate EVERYTHING! They (HOA) even have the power to tell you you can't rent your own property! Oh, and besides that, you are subject to their fiscal responsibility (or lack thereof). What if your HOA isn't putting away portions of the monthly dues to pay for capital improvements? That's right, you could have a big assessment coming your way and you don't even know it.
I do a weekly video blog called "From the Trenches" and this week (view it here:https://youtu.be/Zcx0cplVObw) I talk about my condo rental experience and what I learned from it. I share about how I got the condo, what I did with it, and how I got out of it.
So what do you think about condo's as rentals? Anyone happy with their condo rental?
So you owned it for over three years and hated it. Did you ever get involved with the association? Did you go to meetings? You say "they" but it should be "we". You should have been more involved maybe.
Good point @Rob Beland , did I ever get involved? I did. The problem was the majority ruled in this case. When I first started out as an owner they only allowed a certain amount of rentals (25%) and I was in compliance. Then the HOA did away with that and allowed anyone to rent their units. Once that happened the total number of rentals in that complex jumped up really fast. Because of the number % of units that were rentals the condo's couldn't get FHA financing, and I think even conventional financing was tough. Also the majority of owners didn't want to increase HOA dues to cover capital improvements and their was lots of differed maintenance. Very frustrating situation to not control my own destiny with my income property. Again, those are just a few of the reasons I hate condo's as rentals.
How many condo units do you have as rentals? What has been your experience?
I bought a condo in Davis, CA, and lived in it. I did make sure that rentals were allowed, in case I ever wanted to move and rent it out. I sold it one year later, because of the HOA for the same reasons you did.
I also got on the board, and was the only voice of reason (LOL). One guy wanted to have a garage door on the shared carport on his unit, and lobbied to get approval to do this on every unit. Dues went up to pay for it. Total nightmare. These four-plex condos were 30 years old. 30 years as open carports. Now, there is maintenance on 100 garage doors. Now the unit above the "garage" has to listen to the noise. Now there are missing remotes. Now many owners' vehicles won't fit in the carports with the door closed, and now the rule is your garage door must be able to close. And only two cars out of 4 units can be in the "garage"....
So, will that "temporary" increase in dues ever go away? Not likely. And they'll probably have to increase them even more.
Then there was the plant nazi who harassed me about my tomato plants planted in pretty ceramic planters....
OMG, I couldn't get out of there fast enough!
Even as a homeowner, HOAs are a nightmare. And it's a cost you can never be sure of. And they can foreclose on your property. And nobody on the board has to know a darn thing about managing property, or all that money... They're really a crazy investment.
I have a condo...and want to sell it. No control...and kind of pointless to try and change things. Too many people that don't like rentals!
John Thedford, John Thedford | 239‑200‑5600 | http://www.capehomebuyers.com
I wouldn't own a condo if you paid me.
Some really good points here.
Me personally I would never buy one.
We've got an almost-new rental condo in an upscale development that we bought during the crash at a fire sale price. It cash flows, the tenants are great, and I wish we had bought five more, because it has doubled in value. Condos were the worst hit during the recession, and have bounced back strongly as the market returned to normal. I'm almost looking forward to the next recession for the opportunity to pick up more.
We also have some older condos in another community. I'm on the board, the other members are long time residents and one other investor, and it's been a good investment so far. I do sometimes worry though about what the future will bring as the older board members retire.
HOA boards and investors have different objectives. You care about cost and they are owners that only care about quality of life. They would prefer not to live next to a new renter ever 1-2 years. They would prefer for 100% of the units be owner occupied. You have a lot going on in your life, they are typically retired or semi retired professionals (atty's, CPA, etc) with nothing but time on their hands.
I have insured hundreds of HOA's and attended way too many board meetings... They are not people I prefer to work with at this stage in my career. I cannot imagine allowing one to control one of my investments. I prefer RE over stocks because I like having control. Investing in a condo defeats the purpose of owning RE IMO.
I inherited my father's condo in CT and am fortunate that the President of the Board of Directors genuinely cares about the complex and has kept up the maintenance as necessary. They also have a professional management company. My sister and I split $1600 month rent and I could not be happier. No worries about lawn maintenance or snow removal. :)
Monthly fees are $250 with a $15/mo special assessment that has one year out of five left to run. I have a single older woman as a tenant and I don't have to worry about anything. I have a management company that located her and collects the rent and handles repairs, of which there have only been one or two very minor. They got more rent that I thought so they pay for themselves, as far as I am concerned.
I have also lived in a condo so understand that due diligence with the association's budget is key, if I were to invest in another. I would actually like to buy my Florida retirement condo now and rent it out for the next 10 years. But prices are high for what I want. Looking for a great deal near New Smyrna Beach!
I showed a small attached villa to a potential client last week. The owner of the villa MUST sell it. The HOA changed the rules and no longer allows rentals. She had previously had it rented for the past 10 years. Now, she is either forced to sell it or move in. This is the danger with HOA or condo associations. This is the reason I won't typically buy in either.
John Thedford, John Thedford | 239‑200‑5600 | http://www.capehomebuyers.com
Here's my thoughts. Condos are great for me, because there is no upkeep. No lawns to do if the tenant moves, or is lax, no landscaping overgrown, no roof repairs, no painting. Insurance is cheaper too, because of the master policy, and since I require my tenants to have a HO policy-it's next to nothing. It's great for an absentee owner. As for your cons, I simply check the rental restrictions and the financials before I make a decision. That's simple enough. Here's the flip side to the single family investment. The most harassment I've ever received are from single family neighborhoods. One neighborhood charges me $350/year for a "rental permit", with the money from this fund going to a part time "covenant enforcement" person, whose job it is to monitor rentals. (they hate them in most nice single family neighborhoods) If a blade of grass is 1/8" over, I get a letter. if the garbage cans are not taken off the curb promptly, I get a letter. Another s/f neighborhood fined me for having a "for rent" sign in the front yard. They decided that they didn't like them and banned them. Then, when I removed it, and because it was wet and I didn't want to put it in the trunk, instead leaning it on the side of the home where no one could see it, I got another fine for not removing it from property!
And good luck in trying to get these rental restrictive policies relaxed-impossible when homeowners outnumber investors by 20 to 1! Final score-my condos are the most profitable with the least amount of hassle!
Very informative information for a new guy. I was looking at purchasing a condo and renting it out as my first property. It was in my budget and had a tenant in place. I spoke to a few property managers and they turned me away from condos all together. Reading through these posts I see a lot of similar points they brought up. Pretty sure I'll be passing on condos. At least until I have more experience.
I agree that condos are a hassle, we had one that we rented out but the HOA fights and constant arguing over everything amongst the owners meant I had to dedicate more time to it than the revenue warranted.
@Tyler E. Your comment makes the thread worth it! It's good to hear all of the pros and cons of different investment types so you can make an informed decision. Sounds like some people have had some good experiences with condo's as rentals, but overall there are a lot of cons. Even though I hate condo's as rentals, I still had a good experience with my condo. I knew what I was getting into when I bought it. It was a straight cash flow and appreciation play but I hit the eject button ASAP. It worked out for me, but I wouldn't buy one looking at it as a long term hold.
I rent my old condo, for a long time I loved it - no maintenance etc. but lately the property management changed, they made a whole slew of new rules about renters, and basically are making it difficult and expensive to rent your unit. It literally feels like the intention is to drive investors out. Lots of fees... and fines if you don't do it all right. I am currently an owner occupant of a 2 flat, and I got used to making my own rules. Now I am seeing how the condo thing seems a bit ridiculous. It makes good money and is low maintenance so I don't want to give it up, but boy they are making it really hard for people like me....
I own 3 condos. They are my easiest 3 properties to manage and my 3 best cash flow properties. I've also owned other ones in the past.
I own 3 condos. They are pretty easy to manage but it's all about getting the right tenants in there. The HOA fees are quite large, so you have to take that into account when renting the units.
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