Condo BRRR - Worth the effort?

Question

Hello all,

I am a new investor thinking of purchasing a condo as it's the most my cash on hand can purchase. In your experience, has condos gained much equity after updating the kitchen and bathroom? This won't be a flip, but to rent out to section 8, but I'd like to get a chunk of change via cash-out refi so I can acquire another property.

Deonte Hill · Answer

Thank you! This was very insightful and helpful!

River Sava · Answer

As Ko mentioned, do you know if it is warrantable or non-warrantable?

Also, I would be wearly about the HOA fees with condos espeically if you are going to BRRRR this and rent out to section 8. Typically single family / small MF (2-4 units) will have higher appreciation.

Wale Lawal · Answer

I am glad you find it helpful.

Wale Lawal · Answer

@Deonte Hill

Investing in a condo may be a wise move, provided that it fits within your financial plan and investing objectives. Taking into account the possibility of an equity gain from renovations and upgrades, keep the following in mind:Market Conditions: Depending on the state of the local market, changes such as bathroom and kitchen renovations may or may not have an influence on a condo's equity. Renovations may have a major influence on the property's value in some locations while having less of an effect in others.Comparable Sales: To estimate the possible value gain from improvements, look for recent comparable sales (comps) in the neighborhood. Seek for condominiums with comparable renovations and evaluate the impact these upgrades have had on the selling prices of those properties.Rental Demand: While renovations might increase a condo's appeal to prospective tenants, especially in the Section 8 leasing market, it's important to assess if the cost of the improvements can be recovered by the anticipated rental revenue. To comprehend local rental prices, vacancy rates, and rental demand, do in-depth market research.Cash-Out Refinance Strategy: Renovations that increase the property's value can potentially provide you with equity that you can tap into through a cash-out refinance. This additional capital can then be used to acquire another investment property or for other investment purposes.Cost Considerations: Before proceeding with renovations, carefully evaluate the cost of updates relative to the potential increase in property value and rental income. Consider working with contractors or renovation specialists to obtain accurate cost estimates and assess the feasibility of your renovation plans within your budget constraints.Risk Mitigation: Keep in mind that renovations come with risks, including cost overruns, project delays, and unforeseen complications. It's essential to budget for contingencies and plan accordingly to minimize potential setbacks.Ultimately, whether updates like kitchen and bathroom renovations will significantly impact the equity of a condo depends on various factors, including market conditions, rental demand, and the cost-effectiveness of the renovations. Conduct thorough due diligence and consider seeking guidance from local real estate professionals to make informed investment decisions.

Jay Thomas · Answer

Condos can be a good option for new investors, but updating kitchens and bathrooms might not add as much value compared to single-family homes, especially with potential restrictions from condo associations. For Section 8 rentals, focus on practical updates that meet program standards rather than luxury finishes to maximize returns. If considering a cash-out refinance for another property, ensure you have enough equity after renovations and weigh the long-term implications of increased debt. While Section 8 rentals offer stable income, be prepared for additional regulations and inspections, and thoroughly research program guidelines. As alternatives, explore house hacking for faster equity building or consider other investment strategies aligned with your goals.

Deonte Hill · Answer

No, it will not be.

Jake Baker · Answer

@Deonte Hill

Will this be your primary residence?

Ko Kashiwagi · Answer

Hi Deonte,

What are the comps saying? The value increase via kitchen/bathroom update is market dependent. One thing to take not is to figure out whether the condo is warrantable or non-warrantable.

Condo BRRR - Worth the effort?

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