This is a question on the minds of many real estate investors as draws to an end. As you may already know, condos or condominiums are multiple individual units housed in one complex or building. Unlike apartment buildings that are owned by one entity, condo units are individually owned.
Condo owners share common facilities such as pools, gyms, and grounds, for which they are required to pay a monthly maintenance fee. Here is why condos are a good investment in the US housing market :. A recent Redfin report revealed that year over year condo sales dropped Before coronavirus broke out, the price for condominiums had hit a 3-year high in January with a 9. However, the sale price of condos has been falling steadily since March.
With the pandemic being far from over, condo prices are not likely to increase significantly in the near future. As a result, you are likely to get a good deal if you invest in a condo in Even though COVID is driving prices down right now, once the nation is past this crisis, condos are likely to continue back on their path of historical appreciation and price growth.
However, the rate of appreciation of property boils down to location. A good location is characterized by the following factors:. This is not only expensive but time-consuming. Here are some questions to ask:. If your condo checks out in those areas, then put it through one final test. Ask yourself, Is this a condo I would want my family to live in? If you think your family would love living there, then you found yourself a good investment, baby! Buy that condo! The plus side is that you can charge more per stay than the monthly rate for a single-tenant condo.
And you can use the space yourself anytime you want. Lift off some of that weight with the help of a real estate agent. Our team vets and coaches agents from all over the country to make sure we only recommend ones who get the job done right and give you the same trustworthy financial advice you hear from us.
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While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. Near the beginning of the pandemic, plenty of real estate analysts wondered if an exodus from dense urban areas would lead to an abundance of empty condos. Condo association fees: Condos generally have a homeowners association that assesses a monthly fee, and in some cases these can be rather high.
These fees can be worthwhile, depending on what they cover. But they can give unsuspecting buyers sticker shock and add to the expenses your rental income has to cover. In addition, if a major repair or improvement is planned say, a new roof , a condo association can impose a special assessment to cover it. That's on top of the standard fees. Financing difficulties: You can get a mortgage for a condo, but it can be significantly more difficult than financing a single-family or multifamily property.
Some condos prohibit rentals altogether, while others have specific rental restrictions. Slower appreciation: Condos tend to be better suited for income-seeking investors. They typically appreciate in value slower than comparable single-family and multifamily properties. This is important for any investment property, but condos can be tricky as they have additional fees to account for.
In a nutshell, you want to make sure that your condo will generate acceptable cash flow over time, even accounting for things like vacancy, maintenance costs, and special assessments. Your cash flow will be significantly better.
Before you agree to buy a condo, you want to see that the association is in good financial condition. If the association has little money in reserve, for example, an increase in monthly dues could be in store.
Delinquencies are another major potential red flag. If a significant percentage of units are delinquent on their association dues, it could mean those owners who are paying as agreed will end up paying significantly more.
I strongly advise against buying a condo in an association that's having financial difficulties or at least incorporating this fact into your offer price , as any of these issues can make financing next to impossible.
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