Condo rental risky or not?

Question

I have an eye on a $154,000 condo tow bed room two bath. The condo was updated and is in no need of major repair. I was wondering if renting a property like this would be a good idea?

Kenny Smith · Answer

@Ethan Kudrna

Agree with everyone else, we'd have no idea if this is a good idea or not without knowing what the numbers are?  Before you do anything, you need to figure out what you're strategy is, LTR, MTR, STR?  What are the HOA's rental requirements, length of stay, etc?  What part of town is it in?  If you're doing an STR, are you in a desirable travel destination?  MTR, are you near hospitals?

Best of luck!

Kenny Smith · Answer

@Veronica Woods

Unless their covenants and bylaws are completely flawed, that is not how the HOA is ran.  Whoever doesn't pay their dues or assessments, the HOA places a lien on the property and could eventual foreclose on your property to get their money.  Also, to further protect yourself from large assessments, a condo owner can get what is called an HO6 or loss assessment coverage through their individual insurance carrier.  I do agree the board of directors has huge power within the community though and can affect how it is maintained.  It is important to look at the HOA's reserve funds, and look at their meeting minutes to discuss upcoming repairs, etc, and how they tend to upkeep the community.

Veronica Woods · Answer

Hello,

You have to evaluate the strength of the HOA management, as well as the other owners. If you have multiple owners in arrears in your community, the rest of the owners will have to shoulder the cost of taking care of the building. For instance, you need a capital repair that costs $10,000. You should be able to divide the cost by 20 for the 20 owners, but you can only count on the 18 that are up-to-date in their HOA fees. Lastly, you have the evaluate the consistency in the HOA management. I have seen buildings go downhill when a strong HOA president sells and moves on.

Chris Seveney · Answer

@Ethan Kudrna

Condos have pluses and minuses. The plus is you have very little maintenance you are responsible for and may not even need a property manager. You only need to deal with interior items in your unit.

The bad is the hoa and how they are managed. A decent hoa is not bad but a poorly run one can run hoa fees up considerably. So run your numbers but assume hoa fees go up more than rent every year

Theresa Harris · Answer

If really depends on what the costs are (mortgage, condo fees, property taxes) and how much it will rent for.  With condos, the entry point is often lower, but the condo fees add a lot to the expenses.  You also want to make sure the condo is well run, finances are good and they allow rentals.  check the rules around rentals and fees. Some have fees for people to move in or out.

Garrett Christensen · Answer

I'm not familiar with your market so I'm not sure of the exact numbers on the deal, but you should just carefully estimate the potential expenses and potential income. By doing so, you can make an informed decision about whether renting out your condo is the right choice for you. BP has some great tools for doing this and I think they're free the first few times you use them.