Many real estate investors looking to diversify their investment portfolios are asking themselves, “Should I invest in condos near me in 2022?”
Table of Contents
- What Is a Condo?
- Should I Invest In a Condo?
- How to Find Profitable Condos Near Me in 3 Easy Steps
- Key Takeaways
Savvy real estate investors know that condos are some of the best investments you can make in real estate. Firstly, the demand for condos from renters is ever rising. Secondly, they’re fairly easy to manage compared to other types of rental properties.
However, you should take a careful approach, especially as a novice investor. You should keep in mind a few things when investing in a condominium.
That said, what is a condo? Why should you buy one? How can you actually buy one? In this article, we’re going to explore this topic and share some insights to help you decide if it’s the best investment for you.
What Is a Condo?
A condominium, also referred to as a condo, is a privately-owned residential unit within a housing complex made up of other condos. Each of the condo units is owned by individuals. If you choose to buy a condo for rental income, your tenant will be renting directly from you.
Rental investors who own condos are responsible for whatever happens in their individual units, such as property maintenance and repairs. Other than that, they’re expected to pay for condo association fees. The charges go towards maintaining the community’s shared common areas, such as garages, swimming pools, elevators, gyms, and outside hallways.
Most people are used to condos in high rise buildings. However, some housing markets also offer detached condos.
Should I Invest in a Condo?
Many investors buy condos due to their simplicity. In most cases, you’ll only need to take care of the property. The rest, including the lawn, flowerbeds, and driveways, are taken care of by a professional maintenance company. It is why condos are ideal for older investors, people who travel regularly, and individuals who’re not willing to spend time and energy on property management tasks.
That said, let’s look at the pros and cons to help us understand whether buying a condo is a wise investment.
Benefits of Investing in Condos Near Me
The main benefits of investing in condos for sale near me are directly intertwined with the work the investors must put in before and after buying the property. Basically, investors get from the condo what they put in.
With that in mind, let’s break down some of the vital benefits you can realize over the period of investing in condos near me for sale.
Less Property Maintenance
As we’ve mentioned, one of the greatest benefits of investing in a condo is that you don’t need to worry about exterior property maintenance. For example, you and other condo owners don’t need to take care of mowing the lawn, maintaining the flowers, or clearing the snow from the driveways.
Ideally, condo owners own the interior of their individual properties, not the exterior. As such, you won’t have to worry about obtaining the funds needed to repair the roof. There is no need to contact different contractors to maintain the electrical appliances, check the drainage system, or replace the siding.
The condo association is responsible for the said tasks. However, make sure you check with the association before investing in new condos for sale near me because each condo association can decide what the owner is responsible for and what the association is in charge of. Read the contract carefully before closing the deal.
Due to the fewer maintenance tasks, condos are an ideal investment for investors looking for a place to enjoy their retirement. There are close neighbors, numerous activities to take part in, and professional staff to handle the repairs.
As an investment, condos near me are more affordable compared to single-family homes or townhouses with the same features and amenities. You will need a smaller initial amount to get started.
According to the National Association of REALTORS (NAR), the median property price for a single-family house in the US is around $360,000, while the median property price of a condo is $280,000. In some housing markets, the asking price for a condo can be significantly lower than that of a single-family home.
It makes condos an excellent investment opportunity even for investors who may not have a huge budget.
If you’re buying the condo for rental income, make sure you can charge a fee that will allow you to cater for all ownership costs, such as association fees, and still remain with a decent profit.
Property Value Appreciation
Historically, single-family homes have appreciated at a higher rate than condos. It is because single-family homes used to be more appealing to most buyers, and you also got the land where the property is located.
However, the trend is now changing. In the past five years, the average condo value rose by 38.4%. The average single-family property value went up by 27.9% over the same period. Why is this happening?
Condo association rules help you preserve your condo’s value. To make any changes to your property, whether inside or out, you’ll need permission from the association. For example, in most locations, you can’t change your front door’s color. Also, most associations prohibit the residents from conducting any business activities within their residences.
The stringent rules deter any activities that usually lead to property depreciation. Also, the said regulations are meant to maintain a tidy community where all owners and residents are happy.
Depending on your investment’s location, the property appreciation may also be caused by the ratio of supply to demand. If your housing market offers a limited number of condos for sale and also less land to construct properties, it’s likely your condo will appreciate faster.
Related: Is Buying a Co-op for Investment a Good Idea?
Most condos offer enhanced security since they’re located within gated communities. They come with locked entries and more guards for the residents. Visitors are more likely required to show an invitation from their host. The condos are equipped with an intercom to allow approved guests in.
Such a kind of security protocol is reassuring as it reduces the risk of home robberies and break-ins. Residents who live alone love the arrangement and will pay a premium fee for it.
As a property owner, you can take pride in investing in condos for rent due to the high-quality amenities in the communities. Do you want to live in a community with fitness amenities, such as gyms and swimming pools? A clubhouse for Friday game nights for you and your neighbors? They may be some of the top reasons to invest in condos near me.
The activities also make it easier for you to know your neighbors since you can socialize while unwinding. It’s also a great perk for those who live alone.
It can also be your main selling point to keep your rental property occupied for a large part of the year. The amenities assure you of a quick turnover whenever a tenant moves out. Short vacancies are your best friend when you want to generate a positive cash flow.
Cons of Investing in Condos Near Me
While investing in condos has many benefits, there are just as many downsides. They include;
Condo Association Fees
We’ve mentioned that the homeowners’ association is in charge of the maintenance and management responsibilities. As you can already imagine, the pool, gym, lawn, and security system cost money. Ideally, you become a business partner within the community where you buy your condo.
You’re required to pay homeowners’ association (HOA) fees every month. The HOA fee goes towards the community’s maintenance, as well as any future investments such as parking lot recarpeting. Condos might become expensive, especially if you also have a mortgage to repay every month.
HOA fees vary depending on various factors, such as location, quality, and size of your community. However, they’ve been increasing each year. The average HOA fee in 2005 amounted to $250 monthly; in 2015, it was $330. Of course, the amount is lower in some locations and lower in others.
While others can use inflation to justify the rise of HOA fees, the rise surprisingly doesn’t match the rise and fall in home values. HOA fees have continued to rise even when home prices are falling. HOA fees increased by 32.4% between 2005 and 2015, while home values rose by 15.1%.
As such, other than the hefty HOA fees you’ll have to pay every month, you can also count on the fees to keep going up each year. You risk being priced out if you don’t budget for such costs since you can’t afford your condo.
Potential Financial Mismanagement
If you’re paying about $300 as HOA fees, it makes sense to expect everything to be taken care of smoothly. However, this isn’t always the case. HOAs have two types of accounts:
- Operating Account: Used to settle regular maintenance expenses, such as pool maintenance, lawn mowing, and snow shoveling.
- Reserve Account: Used to hold money for long-term projects, such as parking lot recarpeting, building a new playground, and replacing the community fence. You can think of this as an emergency savings account.
If an HOA is well-managed, both accounts will have enough money for regular maintenance, long-term projects, as well as emergencies. However, some HOAs aren’t well-managed. In such areas, you may be required to pay for some occurrences, such as a tree falling on your roof, out of your own pocket. It can add hundreds and even thousands of dollars on top of the fees you’re already paying.
Most HOAs limit the number of condos that can be rented in the community. If the limit is already met, you might encounter problems renting out your property. In addition, the condo association might also limit the length of the lease, the number of occupants per condo, and the use of the condo.
While these rules are meant to maintain the feel of the community, they can be limiting when you want to use your condo for rental income. Again, make sure you check all HOA rules and regulations before buying rental condos near me. Also, ensure that your tenants can comply with the requirements.
How to Find Profitable Condos Near Me in 3 Easy Steps
Since we’ve already seen why you should invest in a condo for sale near me and the possible drawbacks, let’s look at how you can invest in a lucrative condo. Much like other types of real estate properties, you can find profitable investments in various ways.
However, we’ll focus on three simple steps in this guide. Here are some pointers to observe when looking for profitable condos:
1. Find a Real Estate Agent
The most straightforward way to find lucrative condos near me for rent is by working with a real estate agent or broker. Real estate professionals have vast connections within the industry and are in the best position to advise you on the best property to buy in the local market. They may be especially helpful to novice investors who may not know how to avoid common pitfalls when buying a condo.
Here’s a breakdown of what you can get from a real estate agent:
- Analysis of each neighborhood within the local market
- Choosing an ideal rental strategy
- Choosing a financing option
- How to go around any obstacles faced during the entire process
- What property management company to work with after buying the condo
Make sure you’ve understood your agent’s commission structure before agreeing to work with them.
Related: How Much Do Real Estate Agents Make in 2022?
2. Use Online Real Estate Investment Tools
In this digital age, online real estate investment tools have become an essential part of investing. Nowadays, savvy investors walk with such tools through their investing journey.
Mashvisor is an online real estate platform that helps real estate investors access reliable and up-to-date data to help them make smart investment decisions. Mashvisor also gives you access to rental comps to see how other condos for rent near me are performing.
Make sure you book a demo today and learn more about our investment tools.
First, our real estate heatmap helps investors identify the best neighborhoods to invest in within a certain area. The heatmap uses visual cues to show the best neighborhoods based on property data and predictive analytics.
Once you’ve identified a profitable neighborhood on the heatmap, it’s now time to find lucrative rental homes near me using the Property Finder. The tool uses machine learning and AI algorithms to quickly provide you with property listings that match your search criteria.
It then gives you access to the rental property calculator, which lets you further analyze the property using return on investment metrics, such as cash on cash return and cap rate.
3. Check Off-Market Listings
Off-market properties are listings that don’t appear on public platforms, such as MLS. You can also find profitable condos near me by looking for off-market listings. Here’s how you can access off-market listings:
- Use direct mail marketing strategy to reach out to potential condo sellers
- Capitalize on your real estate network
- Check public records for recent foreclosures near me
- Use Mashvisor’s Property Marketplace
Mashvisor’s Property Marketplace is the best option for beginners looking for profitable condos. It eliminates a lot of hard work required to find off-market properties and also allows you to analyze them.
Related: 16 Best Ways to Find Off Market Properties
Investing in condos near me is a great real estate investment for both novice and experienced real estate investors. However, making a profit from condos isn’t a given. This comprehensive guide will help you decide whether you should take the next step. Also, use Mashvisor tools to find lucrative condos in the location of your choice.
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