Condo a good rental?

Question

Looking to buy me a rental and just wondering what would be smartest, a small house or a condo? I live 1 hour from where I would invest so a condo would be easier for me. Cash flow is nice but I dont need it I just want to do what is smartest in the long run. Thanks

Elizabeth Nurnberger · Answer

If you are looking into a condo I suggest a lot of due diligence to learn about the management, financials, by-laws, and how special assessments work for that specific property.

I used to live in a really neat historic condo.  It was originally a sugar mill plantation that was converted into 14 units.  The complex was self-managed with by-laws from the 1970's.  I loved the place, but it came with challenges including special assessments because of the historic nature of the building, re-writing the outdated bylaws and of course the drama of having your condo board be your neighbors!  Whew!

I understand that's a unique situation, but I highly recommend the same amount of due diligence on the condo association as well as the numbers on the unit!

Good luck!

Jason Hendrickson · Answer

The smartest thing is what works best for your unique investing situation. Nobody can answer that question for you - there are upsides and downsides to owning either type of property - it's simply a matter of which one best meets your objectives.

Andrew Toews · Answer

@Ray Harrell Good point.

Andrew Toews · Answer

@Elizabeth Nurnberger Thank you!

Andrew Toews · Answer

@Theresa Harris Thanks!

Andrew Toews · Answer

@Jason Hendrickson thanks.

Ray Harrell · Answer

Another thing to check is whether an additional rental unit is allowed in the complex. Some have maximum number of units that can be rented. You may purchase yours and right before closing that last person will rent theirs meaning you can't rent yours, then you're stuck. The reason is that more rental units devalues the building and each owned unit as a whole. I want to change our bylaws to only allow 25% rentals (4 out of 16 units). That will increase the value since new buyers will HAVE to occupy, and when they move rather than being an absentee landlord, they will have to sell to a new owner-occupant.

Theresa Harris · Answer

Pros of a condo are it is usually less money on the purchase price, lower property taxes and less maintenance as there is no yard.  Cons are condo fees and other expenses that the condo board may have (fees to move in and out), they may change their rules about renting.

Single family you may make more money in rent (depends on the type of condo and house you are comparing), property taxes are higher and there is more maintenance expenses.  There are no condo fees.  You may get a longer term tenant in a home if a family moves in.

Run the numbers on both and see how they come out.

Condo a good rental?

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