When does it make sense to invest in a condo?

[Nick Brubaker]

Hello all!

My wife and I are in somewhat of a uniques situation and we are trying to decide if purchasing a condo makes the most financial sense:

We recently moved back to the Atlanta / Decatur area after 5.5 years in Japan. We are between employment and staying with my parents - and in a hurry to move out and live on our own again. Not having steady income will make obtaining a loan at a good rate quite difficult, particularly with our time frame. Fortunately we do have about 100,000 available to put toward both investments and our own property (if buying does in fact make the most sense at this point).

We're trying to make the best financial decision. If we spend the entire 100,000 on the property we ourselves will live in than we would want it to be a multifamily or for the layout to be conducive to additional tenants/renters. Another strategy would be to aim to spend half that on a property for ourselves alone (just came from Tokyo and are used to small units) and invest the other half separately.

Anyway, there are plenty of SFH's for around 50,000 in and around Atlanta, but they are hard to find in areas where we would be comfortable enough living. There are condos available in the same price range in much better areas. The issue is that the condos we are looking at have monthly HOA fees of $250 (not including utilities) and rental restrictions (15% of total units) with long waiting lists. We are trying to crunch the numbers on these condos like we would a detached SFH and even add in the total HOA fees for the two years we would plan to live their as if these fees were any other rehab expense, as a way of comparing this option with the straight out SFH option. I am also doing my best to compare these options to simply renting.

Anyway, I am very interested in hearing the insights, opinions, and experiences of other BP members about whether or not condos can make better financial sense for a first-time homebuyer/investor looking for a low-cost property for themselves. I realize that a lot will depend on the specifics of the situation - I am happy to provide more details.  

[Mike F.]

All I buy is townhomes (not condos), every property has an HOA fee. That fee isn't just worthless, it pays someone else to do all the maintenance to the exterior, painting, roofing etc... it also pays for cutting of the grass and snow removal and trash pickup. With townhomes / condos you are only dealing with the interior. Many complexes have pools and club houses, work out rooms etc...

I do extremely well with all my rentals, and enjoy nice appreciation and I spend none of my time managing anything to do with the exteriors. These types of rentals make sense if you want to spend a minimal amount of time dealing with your properties.  They are cheaper to purchase and the rent like crazy.

PS - you want the properties that are managed well, the ones who aren't hitting owners with assessments for big repairs. The good ones are budgeting year after year through part of your HOA fee for big items like roofs, painting, parking lot repaves, the new roof 12 years down the road should be being paid for by setting aside part of the HOA fee every month, not a special assessment as if the HOA didn't know that a roof eventually has to be repaired.