A lot of people consider real estate properties a great investment and a way to generation extra income through rent. However, buying condos can be expensive too. Are condos a good investment? Today, we will explore whether you should buy private condos.

Pros of Buying a Condo

There are many benefits to buying a condo that you might not have thought of.

Are condos a good investment? Here are some pros that might prove the answer is yes!

Reduce Purchase Price

Condos can be a great option since they don’t have a high purchase cost, especially when compared to single-family homes. The affordability ensures people are able to profit more from rent and they help create larger cash flow.

Great Amenities

Most private condos come with amenities that residents can use. These are often funded by Housing Society fees and include gyms, pools, grilling areas, and other communal activities that you might love. These features are also great since they can increase the overall value of your property and attract renters.

Minimal Maintenance Work

Are condos a good investment? They are if you consider all the work and money that goes into upkeep of homes. Condos ensure minimal upkeep responsibilities since exterior maintenance is taken care of by the condo’s homeowners association. It can be a great feature of investors that are looking for passive streams of income through rent. However, you will need to pay the homeowner association’s fees, so keep that in mind.

However, it can still be worth it since you are not spending a lot of time and money in maintenance tasks. All of this time can be better spent overseeing other investments or your full-time job.

Cheaper Insurance Costs

A great benefit of owning a condo can be that the insurance cost is often cheaper for renters. There is a simple reason for this. For instance, the roof of the condos is damaged. These are a common element shared by all owners; hence, any coverage comes under the overall condo’s insurance policy rather than the specific condo “wall-in” insurance you are paying for.

Cons of Condo Ownership

While there are many benefits to condo ownership and they may be a great investment, there are some drawbacks that you should be aware of when making the decision.

Monthly HOA Fees
Buying a condo means that you have to pay some common charges to provide upkeep for the condo. Homeownership association fees can be high. In some cases, the monthly expense can run into hundreds of dollars that impact the overall rental profit you are making.

Before making an investment, make sure to budge the HOA fees into your plan before making a decision.

Homeowner association fees also increase every year. While they are usually a small percentage increase, make sure to keep this in mind.

Leasing Fees
Private condos might also charge separate annual fees to lease the condo. Of course, this varies depending on which condo you are investing in. Usually, it is equal to or twice as much as the monthly HOA fees.

Special Assessments
These can definitely eat up profits! Special assessments enter the scene when the homeownership association decides that immediate cash is need to pay for upgrades, capital expenses, strengthen the financial situation of the condo, etc. They bill the owners to raise the cash they need. These are special circumstances that don’t come very often but they can go into the thousands.

Some condos offer incremental payments over months or years while others may require payment in one go. They are usually based on what kind of condo you have; larger units pay more. There is also no real way to waive the cost. If you fail to make the payment, they are allowed to foreclose on the property. Special assessments also need to be disclosed if you are selling the condo, so buyers might lose interest in purchasing the home.

Rental Restrictions
Are condos a good investment? They might not be if there are rent restrictions in place. A lot of condo units have policies against renters since they prefer owner-occupants. Some private condos might have a policy on how many units you can rent out, which can threaten your profits. Some might have policies in place to only rent out the condo after a year or decline renewing tenants if there are too many renters.

If there are no such policies in place, board members can add them in the future too. So beware!

Frustrating Rental Process
Even in cases where the condo board allows renters, the process is still quite frustrating and long. Usually, you need the approval of the management for a tenant, which means that you need to submit a lot of documentation.

Harder to Get Financing
If you are using a bank loan to buy a condo, you should note that lenders have additional requirements when it comes to offering loans for private condos. Lenders need clean financial records for the condo. If there are high maintenance costs, debt, or uncollected monthly fees, you will receive higher interest rates since it can impact your ability to pay back the homeownership loan.

Many banks also have a policy of only giving out loans if at least 50% of the condo is occupied by the owners. They might be reluctant to offer a loan otherwise.

Conclusion

So, are condos a good investment? Well, you can only find out the answer after checking out what the condo has to offer. Make sure to read all documents carefully and talk to some of the condo owners before making a decision. Their feedback can give you an insight into how the condo is run and whether it is a good investment.