Anything special to consider with condos?

Question

Hi everyone! I have been doing some research and am looking to get into the real estate investment world. I think I'd like to start with owning a rental to generate some cash flow. And I'm not looking really to generate a whole lot, if it's a few hundred to start with, that would be ok. I think at this point, I'm looking to get some experience under my belt.

I've noticed though, at least in my area, that there are a lot of condos up for sale. Does anyone know if condos rent any easier or more difficult than a single family house? And maybe there is no straight answer, so if anyone has experiences, I would love to hear them as well! I live in a college town that attracts many people, so I think there would be demand... But seeing so many for sale makes me wonder... And I've heard condos can be more difficult to sell...

Anyway, thank you in advance for any thoughts or input!

Christine Kankowski · Answer

A few other things to consider about condos- The association can assess all owners for certain repairs and maintenance. For example, at some point, all the roofs or garage doors will be replaced, or fencing around the place. You will have no choice in the matter. (Of course, on a house, you will also have pay this yourself, but you will have a choice as to when and who does it. )

Jon Shoop · Answer

From my research into the different types of SFH's, it seems that Condos typically have the most restrictive and enforced HOA policies. The drawbacks for condos in Dallas and Fort Worth from what I've heard is that condos are spaced next to and above/below one another. So there is a lot higher likelihood of neighbors being upset by speaker volumes, loud walk, barking dogs, water leaks, etc. and reporting it to the board. Along with parking issues is another issue too. I lived in Uptown Dallas for several years between an apartment, a townhome, and a condo. The townhome was the most lowkey and we never heard from the HOA. And at the time I was living with two other single guys in the State-Allen District of Uptown Dallas - to put things in a bit more perspective of what we could have experienced or gotten in trouble for.The condo was another thing. There were certain limitations to what you could/could not have on our balconies and it seemed like they were enforced arbitrarily. Not to mention the parking limitations as well.To me, it seems that a stand alone single family home is a lot more miss than hits when it comes to HOA issues. Ok, so you have to keep your lawn and shrubbery in order and you can't leave your trash out. That's really the majority of the issues I've personally experienced and read about on forums when it comes to the standalones and the duplexes in HOA's. Whenever I bring on a new door to our portfolio, I make certain that the HOA docs are one of the first set of documents I request from a homeowner. There's nothing worse than a tenant unknowingly stepping on a bylaw and getting the owner fined because of something so simple as, "must bring in trash by 4pm on trash days".Hope this helped!

Andrea Weule · Answer

Condos 100% depend on the area and price point. Condos can rent well, but if there is a lot of apartments in the area that's going to be your competition. They can usually offer more specials etc as they have bulk when you only have one. The biggest thing I'd check on with a condo is the HOA. Do they allow you to rent? How much of the complex is already rentals? If too much of the condos are already rentals, it can be very difficult to get financing. How expensive is the HOA? Is the HOA in a good condition or are they struggling for funds and also hurting for maintenance. For me HOA's is the biggest, yes or no for rental properties. Best of Success!

Nadia O. · Answer

My first purchase was condo. It was much cheaper than single family home. It also has tons of amenities which I love. Now it became my rental. It’s been rented for over 4yrs. I did Airbnb in 2014-2016 & it was solid booked year round. The equity has more than doubled since I bought it. Now I think I’m one of the lucky ones. The location was and still is excellent. I’m buying another rental but this time I staying away from condo. Do you want to know why? Although mine is great, I’ve noticed several cons. 1. HOA. It keeps on rising every year. There is nothing you can do to stop it. This can also depreciate the house value over time. 2. Property management would not let me paint exterior or leave decorations past the holiday event. Once Halloween or Christmas is over, I have to remove all decorations or they will penalize 3. Short term rentals - you better make sure they allow it. Mine closed down. But I was able to switch to long term. 4. The value of the home has reached max. It can’t no longer increase Unlike single home. This is the reason why I’m thinking about owning single home for next rental Now the question is what can you afford. the choice to buy a nice updated condo with low HOA than a fixer upper single home, it all depends on how much cash you have in hand. A nice updated place will bring in renters right away with good solid returns. If you don’t have enough cash to renovate, I’ll buy the least amount of work. I was told to buy the ugliest home in the best location. Again only works if you have extra cash in hand to fix it up. Hope this helps

Adam Kelfer · Answer

I 100% agree about reading the HOA docs before you even consider making an offer. My wife is on the board of our current home, which has been a huge help in trying to get rational rules put in place. Also, you need to be careful what percentage of the development can get rented out. If it is a non-warrantable development, it may not qualify for Fannie Mae and Freddie Mac financing, which can drive down the value.