Condo vs Single Family Homes

[Dan Chandler]

I'm debating where to make my first investment for a rental property.  I have always considered a single family but I'm now thinking a condo might be safer way to go since I'm still new. 

Any words of wisdom from experienced landlords??

[Martin Scherer]

Condos are rarely a good investment. Fees go up they don't go down. Your safety is in reading the HOA docs, newsletters and especially the financial docs they are required to provide to you as a disclosure. If you can read them they can tell you the reserve levels and whether they are funding reserves at an appropriate level. If they keep monthly dues arbitrarily low and not building reserves it usually signals that the HOA is going to special assess every needed repair to common area i.e. siding, roofs, paint etc.

Also determine whether they pay water as that can get extremely expensive if hot water is included as many HOA's in large buildings. What is included in your monthly dues? Some utilities? When people pay their own they are much more frugal then when the Association is paying as a whole.

Another concern is how old is the complex.  Have they filed a suit against the developer for any reason?  If there is a pending lawsuit your monthly dues can easily double to pay for it.  In most states their is a statute of limitations in CA 10 years against defects in construction.  

Read any newsletters you can get. The management company should provide them if you ask as well as meeting minutes for at least the last 6 months.  This gives you an idea if there are pending lawsuits. 

 If it is managed solely by the Board of Directors it is a definite pass.  A professional manager can protect the board and yourself should you require help.  A board that is self managed frequently displays errors in judgement that a management company will catch.

One other thing, know what you are buying, the term condo is misused. You may be buying a condo, another type of common interest development or a PUD. They are all different with different rights and responsibilities. Read the CC&R's cover to cover or pay the consequences. Most real estate agents will not know the difference and will call a PUD a condo and they definitely have very different responsibilities. Also do NOT believe an agent that claims everything on the outside is taken care of...it just may not be true as people buying that condo that is actually a PUD will find out. One you own land and structure, one you own air space. Do you know which?