Can a condo be a good investment?

Question

Taking the advice of some of the experienced investors from BP has given me second thoughts about condo investing.

Does anybody have any positive experiences with condo investments as a rental property?

I'm waiting for a response today from Keller Williams Realty on a 1br condo in a nice area of East Hartford Ct.

Asking price $41,900

HOA Fees : $216/month (HT and HW included)

Taxes :$90/month

Unit is currently renting for $650/month

J. Gary · Answer

Joey, in my market, you can get a newly rehabbed 2br/1ba condo for ~$30K and net $700 or so monthly after conservative estimates for HOA and taxes. I wouldn't even look in the direction of a 1 br. In my opinion (and with my model) it makes sense for me to buy condos not just because of the high ROI, but really because of the fact that I can sell it to more different types of borrowers. For example, I could flip the condo to a cash buyer at $50K (they'll make 15%+ annually) or I could flip it to a retail buyer at $60-$70K that would easily qualify for a $500 a month mortgage payment. This is assuming the the appraisal comes in, and the condo building meets what ever standards the bank is imposing. Of course there are risks like HOA fees going up 100% in a year, special assessments, runaway taxes, etc. but these are risks that should be adequately researched and accounted for before you pull the trigger. that's my 2 cents

Mitch Kronowit · Answer

I've owned a condo for 2 decades and it's been a rental for the last 15 years or so. It's not without it's difficulties, but otherwise it's been a great investment. They're relatively easy to maintain (no yard), the outside is taken care of by the association, and the HOA helps keep your tenants from misbehaving. We just purchased another condo not too far from our primary residence. Of course, both condos are in solid middle-class neighborhoods that appeal to white-collar tenants. Most of the condos I've seen in lower-income areas resemble inner-city projects and, therefore, to be avoided.

Rich Weese · Answer

Joey I get the impression that you really would like to buy a condo, so I suggest you go ahead and do it. I don't think you're to be influenced by anything that anyone says here on BP to the negative but I'll try again. A one-bedroom is functional obsolete. You stated that your HOH feesDOUBLED in three years. My guess is that you did not have any"special assessment"during that time or it would've been even worse. Many people have asked for positive experiences from condo investors with no positive reply. That should tell you something. There are so many other problems associated with condos but I seriously doubt whether you care or not about those. The biggest key is your thought process which is faulty in my opinion. If you currently have $45,000 in cash, I assure you that there are single-family residences currently available with owner financing for someone with $45,000 down payment! In fact, I, as well as many others on BP, would be more than happy to sell you something on contract for your $45,000 down, so don't think that's not possible. Congratulations on making money on your townhouse. That would be extremely difficult in the current market. Rich

Joey C. · Answer

Well Rich, I haven't been able to find anything positive about condo investing. I just spent a few minutes reading some of the posts asking the same questions and they seem to point to "NO" don't do it. With that in mind and the responses from Carol and Pat I have decided to hold off and look into a SFH or MF with owner financing. Thanks for being completely honest in your opinions and helping me understanding the cons of condo investing. So, no condo purchases for me. You might of saved me from making a financial mistake. This is something that I really needed to hear.

Joey C. · Answer

Thanks for the response Carol. I am aware of some of the stipulations associated with condo ownership and don't like them..lol. My first property was a 2bd 1.5bth town-home that I lived in for 3 years. . I purchased it for $61,000 and sold it for $84,000. Of course this was when the market was in our favor. The HOA fees went from $85 to $165 for the time I lived there. I guess my point is that as long as it cash flows well, then everything will work itself out hopefully. I'm also looking for anyone who can give me some positive feedback from their own experience as a condo owner. I'm in a financial situation were I can only buy with cash right now and it seems like condos are the only properties in that I can afford. I know single and multi family homes are a better investment but are double the price of what I'm looking to spend.

Patrick Snyder · Answer

I have to agre with Carole. Additionally, SFH's are easier to sell and easier to finance. Plus, with condo fees you mentioned, your cash flow looks to be quite low...

Carole M. · Answer

There have been many posts recently on condos. One important point to think about is do you want to have complete control over your investment. With condos, there are boards, rules etc and assessments. If you want freedom to do what you want with your investment, then condos is not the way to go.