Should You Buy a $30,000 Condo?

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I was on Money.com today and I read an article about condos selling in Florida for less than $30,000 and condos in Las Vegas selling for about the same price. If you’re looking for a vacation home, or you want to move into a condo, then this might make sense for you.

However, as a real estate investor, condos are a terrible investment. Before you freak out and tell me about all of your friends who made a killing off of condos four years ago, let me quickly remind you of something.

Those people weren’t investors, they were speculators. There’s a big difference. A lot of speculators went bankrupt after the market crashed. True real estate investors make their money going in and never speculate on property. Also, real estate investors stay in business for years and many of us become millionaires and multi-millionaires. On the other hand, I’m willing to bet that 99% of speculators go broke.

So why are condos are such a bad investment?

Well, first and foremost, you have condo dues to pay. Condo dues can run anywhere from $50 a month to hundreds of dollars and even thousands. I once saw a condo in Reston, VA with an $800/month HOA fee. These dues will obviously take a huge bite out of your cash flow.

Another reason not to invest in condos is they’re more volatile than single-family houses. They don’t appreciate as well and when things get bad, they tend to crash a lot further. Also, condos tend to attract single people or just couples, not families. Since I’m a buy and hold investor, I like to get families into my properties that are going to stay there for the next several years. I don’t want some kid in college who’s going to live there a year and then move out.

Let’s not forget about the pain-in-the-butt condo association either. They seem to increase the dues every year and you’re always getting a notice in the mail regarding some violation about your door not being painted the correct shade of red.

How do I know this?

Well, when I first started out in this business and I had absolutely no clue what I was doing, I purchased a condo. I didn’t know any better and I wish I would have never, ever purchased it. I learned my lesson and have never bought another condo, and never will again.

If I were you, I’d stick to single family houses and townhouses. That’s were the money is at and those are the types of properties that attract quality and stable tenants that will stay with you for years.

Photo: _cck_

About Author

Jason R. Hanson is the founder of National Real Estate Investor Month and the author of “How to Build a Real Estate Empire”. Jason specializes in purchasing properties “subject-to” and has purchased millions of dollars worth of property using none of his own cash or credit.

13 Comments

    • You seem to be a generally negative person. As such, your advice should be taken with a LARGE grain of salt. Because you don’t like a certain class of people does not mean they are not people to deal with. Basically, you just sound like a whiny jerk.

    • The article you point to, while on a credible site, is another opinion piece. What I’m looking for is solid evidence backed up by actual data. I’m not doubting your claim, but until I see that there is evidence to prove the claim, I’m going to remain unconvinced.

  1. I own a couple “30,000” condos. The HOA kills a big portion of the cash flow.

    They do have some pluses you didn’t mention:

    1. Typically the HOA pays for water and trash. Which saves the tenants money.
    2. Exterior maintenance is pretty much nil.
    3. The prices can drop well under replacement cost.

    I think if you buy in the right associations, where a caliber of tenant you want would like to live it’s okay. Otherwise, not so good.

  2. I think your article has many great points, but I always hesitate to rule out a class of properties when looking for the best investment for a client. Condo’s have their positive points as well. I do business in an area where there are $30,000 condos and even with HOA’s, some of them have incredible cash flow percentages. I can see some of these condos doubling in value faster than most single family homes in our area. Maybe your failure with your condo investment had more to do with inexperience vs the fact it was a condo investment.

  3. I’ve made money in condos, playing Cashflow game but in real life, no experience. I appreciate your perspective – gives a newbie something to think about. I especially like “true real estate investors make their money going in and never speculate on property”.

    Thanks for sharing,
    E.

  4. Condos are a horrible idea when it comes to real estate. I’m sorry but you will always be better off buying a single family house on it’s OWN land than buying a condo because then YOU can decide what to spend your money on.

    No matter how you cut it, a Condo is a BAD idea. They market and sell condos to people who don’t fully understand that once you buy a condo you are buying a partnership with the Property Owners Association and you agree to help pay for everything the entire property needs even if it’s a driveway located on the other side of the property that you never use.

    If you buy a condo, the HOA can increase at ANY TIME. It can increase to ANY amount. Think about that. They can even send you a bill saying you must pay $2000 NOW or they will place a lean on your property, sue you and win every time.

    The moment you buy a condo you are on the hook for the HOA fees and they will ALWAYS INCREASE over time. You would be better off RENTING a condo than owning one, at least that way you could walk away if things got bad.

  5. As Joshua noted above, this article (and a couple comments too) are all opinion pieces. There are pros and cons of both residential homes and condos for investment purposes. Yes, HOA fees can cut into cash flow, but like most successful companies, if there’s a way to predict the bottom line, it’s easier to project profit, and HOA fees help in that regard. (see corporate outsourcing) You might pay $3000 a year in HOA fees, but you’ll pay the same (or likely more) for exterior home improvements too (unless you choose the bad landlord or slum lord route). And yes, HOA fees go up, just like contractors prices and supplies they use to repair and keep your home updated. If someone is truly interested in starting a real estate portfolio of condos, the key is doing your due diligence. (HOA fund amount, history of how the association has voted for things in the past, pre-approved upcoming expenditures, etc.). Not all 30K condos will be a bargain if your HOA fees are high and your association is run poorly, and the same is true for a $300,000 condo. My message is simple….don’t let the negative opinion of others dissuade you. Do you homework and decide for yourself.

    I manage my own 44 “condo only” property portfolio and I’m doing just fine with letting somebody else coordinate the exterior repairs on all of these properties. (Not to mention I’m making a good living off the cash flow and will be ever better off in a few years when some of them start getting paid off)

  6. I closed on a condo in February (my first rental property) and had a rent deposit on it 3 days before I closed, following with a 1 year lease signed a day after closing. I renovated it in 4 days and the tenant moved in immediately. With no vacancy, I’m looking at 24% ROI. I am under contract for another condo and hope to close in April. I hope my condos prove to be profitable.

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