Are condos a good decision for a first time investor?

Question

I’m a brand new investor looking for my first investment property. I live near the GWB on the New Jersey side which allows for a decent amount of condos and apartments for sale. Should these be looked at similar to a single family home? Are they a good investment for producing cash flow or am I better off looking for a multi family?

Any information on condos is greatly appreciated, thank you!

Doug Pintarch · Answer

@Dante Farres  dig, dig, dig.   We did 6 months of due diligence and research and walking around and talking to owners in many many developments and communities before we bought our condo.  You need to know how the HOA is run, how many units are owner-occupied, how big the board is and who's on it, how the management company takes care of the place(s), what the HOA fees include...for every unit you're interested in that's not in the same community. My notebook is 3 inches thick for our first property. When our realtor told us about a unit that was up for sale I knew exactly where the development was and how far from the beaches they were and what side of the highway they were on.  We play with blood money so I take it very seriously.

Mauricio Rezende · Answer

Hey Dante, full disclosure I have not yet invested in any properties so take anything I say with a grain (or more) of salt lol. I'd say it depends really on your objectives with investing. As long as you're running your numbers properly and they make sense any investment can be good.

I believe typically with condos they're usually in an HOA so you'll really want to dig into all the different rules the HOA has when it comes to renting. Another important thing to note with any HOA is the board can change very quickly and if a new power hungry member decides they are tired of long distance owners renting out their community, well they could change that and really mess your cash flow up. That's not to say condos aren't a good investment, I wish I could remember which podcast episode there was someone who basically only invested in condos quite successfully, maybe someone reading this will help me out.

Anyway, do your due diligence and good luck with your hunting. Hopefully someone with more experience chimes in soon.

Shawn Mcenteer · Answer

@Dante Farres tough to say.  North Jersey condos tend to be costly with little or no cash flow but depending on growth in area it could be something for the future.   The simple answer is go with MFR, way better chance of cash flowing but this all varies deal to deal.

Steven McCutcheon · Answer

@Dante Farres

Depends on the area in NJ and how much the HOA fees are. We already have high taxes and property value, so the HOA can eat away the cash flow. The good news is rents are also high so you have a chance for it to work. If you do buy a condo, make sure you know what the HOA fee is and what they cover if something breaks. Do you have to replace anything on the inside or if a pipe cracks outside the dwelling is that your fix or the associations. Just a few things to understand being diving in! Best of luck!

Jason Lee · Answer

A couple things aren't clear from your post.

First, you distinguish between condos and apartments. By "condos" do you mean something like a semi-detached 2 unit condo?

For "apartments," are you sure what you're seeing listed are actually condos? Many real estate websites don't differentiate between condos and co-ops because co-op ownership isn't that common in the rest of the country. Most of the lower priced listings you see around the bridge are co-ops. You can sometimes tell in the description if there's no real estate tax listed, or they mention any kind of income to expense ratio requirements. None of those co-ops that I'm aware of are investor friendly.

If you're looking at the former, there's usually no HOA and so those function pretty similarly to a single family house except there could be an ajoining condo next door. If it's the latter, then as mentioned by others, you really have to do due diligence on the HOA (past financials, management, future capital improvements, etc). Any special assessments could really hurt cash flow and some HOA's can put restrictions on renting out units (lease lengths or fees). On the flip side, I have many condo investor clients that appreciate how easy their condo investments are to manage because the major building systems are maintained by the HOA and so there's typically not much to property manage.

Account Closed · Answer

@Dante Farres If they're viable rentals in your market I would skip straight to a 2-4 unit :)

Are condos a good decision for a first time investor?

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