January 6, 2019

Is it Good To Invest In A Condo?

Investment properties have various sizes and shapes and offer investors the opportunity to earn money through real estate. If you’ve purchased a real estate investment, you’ve probably heard of condominiums and wondered if they were making good investments.

If you haven’t, that’s fine. Condos are typically hybrids between a house and an apartment that a real estate investor can buy and own. Therefore, the question is: is investing in a condo a good choice?

The answer is probably!

While some real estate investors swear by them, others invest only in a single-family home. Therefore, to answer the question if buying a condo is a perfect investment for you it is necessary to understand these investment properties. So, let’s begin.

What is a condo?

Before deciding whether a condo is a worthy investment, let’s take some time to understand what it is and what makes it different from any other type of house.

A condo building is similar to an apartment building except that instead of all the units being owned by the building owner, the condos are owned by individuals.

Each condominium unit has its own certificate of ownership or title.

But, All public parts of the condo, such as the swimming pool, the elevator, a parking lot, the roof and the exterior walls, belong to all owners of the unit. Everyone is responsible for sharing maintenance costs of common areas. This is usually organized via a homeowner association (HOA) which hires management, contractors, etc.

The most significant distinction between a condo and almost any other type of property is the land. Each owner of the condominium owns the land on which it is built. So, if the land value increases, all units benefit. The same is true if the value of the plot decreases.

Why is Buying a Condominium a Good Investment?

First of all, let’s explain some of the benefits you can get from an investment in a condominium. Real estate investors are considering the purchase of condominiums for the following reasons:

1. They are cheaper

The main benefit of investing in condominiums is the purchase price which is often lower compared to single-family houses in a similar region.

Although prices vary from area to area, condominiums are often 20% or 30% cheaper than single-family houses.

Besides, the taxes are also lower and the insurance of the apartment’s costs much less than the insurance of a house because the HOA will pay for insurance that covers the exteriors.

The sole responsibility of the investor is to ensure the safety of the tenant of the condominium. The tenant is also responsible for securing the contents of the house.

In general, purchasing a condo is much cheaper than buying other properties. In Canadian real estate markets for example, the average single-family house is larger and therefore more expensive than a smaller house (in the number of bathrooms/bedrooms). So it may have a higher cost per square foot, but an overall lower cost because it is smaller.

Yes, real estate investors should take into account other factors such as the cost of living in the area and HOA’s expenses when comparing costs. However, a real estate investor generally spends less on the purchase of an apartment for investment purposes.

2. You Can Earn a Rental Income

If you are thinking of renting your apartment, the costs of maintaining the property, the sum of the monthly mortgages and the condominium expenses, will improve the odds that a condo is a good investment for you. You need to set a fee high enough to cover all these costs.

If you exceed the current rent in your community, you are unlucky. Nevertheless, if you get the condo at a very reasonable price, the investment could be worth it. Remember that very cheap condominium must be carefully examined. Make sure you know why the price is less than the value.

3. Low Maintenance Cost.

One of the main advantages of investing in a condominium is that as a real estate investor you are not directly responsible for the maintenance of the building or public spaces and facilities. So you can forget to mow the yard, repair the roof, shovel snow, etc.

Instead, the monthly condo costs cover all maintenance costs and other people do the work for you!

This can make it easier for beginner real estate investors because those condo fees are well established, so you don’t need to account for maintenance, capex, etc.

4. Better Amenities

Tenants often prefer to rent condominiums compared to single-family houses because they can provide equipment such as swimming pools, gyms, and covered parking. Also, you do not have to worry about keeping them clean. Therefore, it is very desirable to get them easily and at a good price.

In the end, “is a condo a good investment?” This question depends on many things.

Whatever your decision is, you can count on the costs.

Condos are an excellent choice for most investors and buyers, but they are exceptional. Therefore, it is worth taking the time to really know what you are going. New buyers, whether they are investors or not, should consider asking the building owners for information.

It is also necessary to determine which external factors can have a positive or negative impact on the value of the property and how long you are willing to hold.

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