For the past decade or so, condominium units have been a popular option for landlords to invest in. It has been very appealing to young renters who have built their lives in the urban jungle. Most condominiums are located in bustling cities and surrounded by corporate businesses, which is why these high-end abodes in tall buildings is preferred by many renters.
However, choosing to get into the condo rental business is not as easy as deciding which restaurant to eat or which clothes to wear. It requires careful consideration of the risks involved in such an investment. You have to make sure that it will be an asset for you, rather than a liability.
The Advantages
Affordability
Compared to buying single-family or multi-family homes, buying a condo unit is usually significantly cheaper. In some markets, a condo unit would only cost around $60,000 while single-family houses will rarely be priced below $120,000.
If you are still relatively new in the rental business, a condo might be a good start in building your property portfolio before you venture on properties that require a larger capitalization.
Good Location
Most condominiums are located in the downtown area, which means it’s closer to establishments and convenient for anyone who hates long commutes. If you plan to rent it for short-terms stays, tourists and visitors would be willing to pay for a place where they have access to popular tourist and leisure spots.
Less expenses
Buying a condo would often require you to pay condo fees that would cover some usual expenses that you would ordinarily pay for regularly. These may include cable, building insurance, pest control, water, garbage collection, and a lot more. Inclusions vary from one condo building to another.
The Disadvantages
Difficulty in Financing
It’s possible to get a mortgage for a condo unit. However, it’s not as easy as getting financing for single- or multi-family homes. Some lenders would ask more requirements before financing a condo unit. They may even require certain specifications like the building must be 50% owner-occupied, or it should have a homeowners association with a good track record.
Rental Limitations
Not all condominium buildings allow rental activity, or set certain restrictions. Rental policies would vary. Some may require a limited number of rental days, or owners must occupy the unit at least for one year before it can be rented to a tenant.
Slower Increase in Value
The property value appreciation of a condo is usually slower compared to other kinds of rental properties, which is why condo units are good options for income-seeking landlords.
A PERK AND A DRAWBACK
Condo association fees can be considered as both a perk and a drawback. It’s a drawback because it’s an additional expense, but it’s a perk because it would cover maintenance costs.
So is condo rental a good investment?
The answer to this question differs on a case to case basis. If you are strongly considering buying a condo to rent it out, make sure the pros outweigh the cons. Then, get a unit in a condo building with a homeowners association with good financial standing, high amount of reserved funds, and no record of delinquencies.
You should also make sure that your unit can be rented and it has strong marketing points like good location and valuable amenities that will attract a lot of tenants and will generate enough income for you to earn a high profit.
To minimize condo vacancy rates, you can take advantage of technology by marketing your condo on online platforms like Padleads where you can create listings and syndicate it to popular rental websites that home-hunters often visit.