Condos are a popular choice in today’s hot housing market, mostly because they offer a more affordable alternative. Condos are also a great option for those who want to be homeowners but do not want the hassle of maintaining a yard and a single family house.
Contrary to popular belief they can appreciate over time, though slightly less than single family homes. The median price of a condo in 2022 is 14.6% higher than the previous year.
Condos are also great vacation and rental homes. This allows owners to make money on their investment long after they have lived in the condo full-time.
What is the best way to buy your next house? Find out if condos make a good investment, whether you are looking to buy a home for yourself, as an investor, or for someone who is planning a vacation.
Local real estate agents can provide you with information on the condo market in your desired area. They will give you an idea of the local market, including which neighborhoods are popular for renting and which are more likely to experience price increases.
Are Condos a Good Investment?
| Pros | You can also find out more about Cons | ||||||
|---|---|---|---|---|---|---|---|
| Often in desirable, central locations | Land ownership is not possible | No exterior maintenance | Heavy Use Restrictions | Property in this category is typically more affordable than similar property types | HOA fees are relatively high | Renting as an investment is easy. | Single-family homes have a lower appreciation rate |
Condos, or condominiums, can be an excellent investment. However, there are some things you should keep in mind.
Condos appreciate slower than single-family houses. Condo ownership is less expensive than single-family home ownership, primarily because it does not include land ownership.
Condos are also popular because of their amenities. These include clubhouses, parking lots, pools, gyms and other recreational areas. These amenities are often accompanied by monthly dues ranging from 100 to $700.
Condo owners may also be assessed to pay for improvements in common areas. This can affect the rate of return on their property. Condos and homeowners associations also enforce use restrictions on condos.
| What does a Homeowners Association mean? HOA is the acronym for a homeowners association. It’s a group of homeowners or condo owners who maintain and manage the property. It can be anything from making sure that the common areas are kept clean to enforcing noise and parking rules. In most cases, residents pay a monthly or annual fee, which goes towards maintenance, repairs and insurance of common areas. Some HOAs may cover other utilities, such as water and garbage. |
Condos still have some advantages in terms of cash flow. Due to the fact that condo owners are responsible only for their own unit, costs like maintenance and repairs are usually lower than a single family home.
Condos can also be more easily rented out because they are located in areas that are high in demand. A condo investment can generate a regular income. Do your research before you make any decisions.
>> Read more: What’s the difference between a condo and a townhouse? And which should you buy?
Investing in a Condo as a Rental Property
Check the rules of your condo association before you make an offer if you are considering investing in a condominium to use as a rental property. Some condo associations have restrictions on the number of units that can be rented out at any one time. Others may require tenants to live in their unit for a certain period.
An HOA might require a minimum of 30 days in order to prevent short-term vacation rentals or 12 months for reducing the number of tenants who move out.
Familiarize yourself also with the local market. Condos located in areas with high demand will be easier to rent, but there will also be more competition. You can make an informed decision about investing in a condominium by doing your research before you buy.
Investing in a Condo as a Full-Time Residence
Consider your location preference and amenities you value, such as pools, gyms and playgrounds.
You should ensure that the condo restrictions you are considering match your lifestyle and how you intend to use the property. If you own dogs, check to see if their breeds are permitted and if residents can keep multiple animals within a unit.
Be prepared to pay assessments. Condo owners are required to pay special fees when they need to make major repairs or renovate common areas.
Ask the condo association about the average amount per owner of the yearly assessment. You can ask if there are any major renovations planned in the next few years. You can then factor in the cost of assessments when deciding whether to purchase a condominium.
Investing in a Condo as a Vacation Home
A condo investment may make it easier to own a vacation house.
A condo is typically more affordable than a single family home and easier to maintain. Most condos are also located in areas near popular tourist attractions.
Remember that buying a condominium as a vacation property may be an investment. However, the considerations for a rental investment are different. Consider the amenities you want in a vacation property before purchasing. They are likely different from the amenities you look for when buying a primary home or an investment property.
Can you rent out a condo?
Condos can be rented out for short or long periods of time, but the rules set by your HOA (also called covenants) will determine whether you are eligible.
Condo covenants can vary greatly, but may include restrictions such as:
- Limiting the number of rental units within a building. You may be placed on a waiting list to rent your condo once this limit has been reached.
- Owners are required to live in their unit for a certain period before renting it.
- Tenants may be required to sign leases of at least 6 months.
- All potential tenants must be subjected to screening and background checks by the association
- Prohibiting short term rentals such as Airbnbs and VRBOs
Be sure to read all the covenants of your condo association before purchasing. It may be hard to use as an investment if they have strict restrictions on renting.
You can read more about this question: Should I sell or rent my house? Please Read Before Committing
Condos appreciate like other properties?
Condos appreciate depending on location, the market and other factors – just like any other property – though at a lower rate than single family homes. In February 2022 the median price of condos was up 14.6% over the previous year. Single-family homes, however, were only slightly higher, at 15.9%.
The Next Steps to Buying a Condo
The process of buying a condominium is very similar to that of purchasing a single family home. If you are financing, you will need to be preapproved for your mortgage. You will also need to find a real-estate agent and make an offer that is competitive on the condos that meet your budget and criteria.
FAQs about Buying a Condo
Can you rent out a condo?
You can usually rent out your condo. However, eligibility is determined by the rules of your condo association (often referred to as covenants). Be sure to read all the covenants before purchasing a condominium. It may be hard to use as an investment if they have heavy restrictions. Find out more about renting a condo.
Do Condos Appreciate Over Time?
Condos appreciate in value over time, just like any other property. However, they do so at a lower rate than single family homes. In February 2022 the median price of condos was up 14.6% over the previous year. Single-family homes rose just a little more at 15.9%. Find out if buying a condominium is a wise investment.
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