Buying a Condo as an Investment Property: Go for it

Real Estate has a history of increasing wealth.  Not only does that include your personal residence, but also those that you rent out.  Based on the latest Survey of Consumer Finances based on data from 2010-2013, the homeowner’s net worth is 36 times greater than that of a renter ($194,500 vs. $5,400)!  To make it even more interesting, according to a recent Forbes article, Chief Economist Lawrence Yun (from the National Association of Realtors) predicts that in 2016 the worth gap is going to widen to 45 times more.  For many of our clients who buy investment properties, they look to condos, even though there are  home owner association (HOA) dues, it makes more financial sense to buy over other forms of property.  Here are three reasons why buying a condo may be a better option as a rental than multifamily or single family residences:

• Lower investment needed: The costs of condos are typically significantly less than the cost of a single family home or multifamily in the same neighborhood. Therefore, it is easier to get into the real estate game.  This also includes if any work needs to be completed to the unit.  You would only generally need to focus on cosmetic work rather than the systems, which can total in the tens of thousands of dollars such as the roof, sewer line, and foundation.
• Lower maintenance: In many cases, you are only responsible for walls-in. This means you are not responsible for the roof, outside landscaping, and parking, making this a much easier property to manage with less out of pocket expenses over the long run.
• Total Return on Investment (ROI) can be the same: If you look at the rents of a condo versus the rents of homes or multifamily in the same neighborhood, often times the math works out to getting the same ROI, even when factoring in HOA dues.

A condo can be a great way to get your real estate foot in the door.  Between the low maintenance and lower initial investment costs, creating a mini real estate empire is easier than you might think.

Photo credit: “Condo Building” by Witthaya Phonsawat