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Is buying a condo a good investment?

There are many factors that play a role in determining whether any property is a good investment opportunity or a poor financial decision. When it comes to condos, there are a few of additional factors that need to be taken into account. Evaluating these factors will ensure that your condo purchase is a sound investment choice that will bring you value.

1. Location, Location, Location

Location is of key importance in real estate investing. The general area where the condo is located as well as the placement within the condo complex can both have a huge effect on the value. For example, a beachfront condo or city center condo is likely to appreciate in value faster than a suburban condo. Ground floor units with a small garden or a penthouse will be of greater value. A condo that looks directly into the building next door is however not going to be of great value.

2. Management And HOA

Condos that are well managed and maintained are far more attractive than those that are neglected and poorly maintained. A poorly managed condo is going to be a bad investment choice. The HOA (Home Owners Association) for the complex can also be a problem or a benefit. Too many or too few rules can be detrimental. However, a good HOA will add value to the investment.

3. Owner Occupancy

Owner occupancy refers to how many units are occupied by owners rather than tenants. The higher the owner occupancy rate of a condo, the greater the investment value. You should be looking at a owner occupancy of above 50% to ensure a good investment. Even if you are looking to buy a condo as a rental investment, a higher owner occupancy rate will add greater value to the condo in the short and in the long run.

4. Appreciation in Value

While condos do generally appreciate in value, they are a little slower at improving than single family homes. For example, figures for 2018 show that on average, condos appreciated in value by 3% while single family home showed an appreciation of 5%. However, appreciation can be greatly affected by the other factors that determine the value of a condo. For instance, a well-located condo may appreciate faster in value than the average for either condos or single-family homes.

5. Intended Purpose of The Condo Purchase

Do you intend to live in the condo, is it a vacation home, are you planning to rent it out or is it a fix and flip investment? There are multiple pros and cons to each of these investment opportunities. These pros and cons need to be weighed up on an individual basis in order to evaluate the worth of the investment. However, there are some general rules that can be applied:

– Buying a condo as second home (vacation or rental) is only recommended if the mortgage on a first home has already been paid off.

– Buying a condo to live in is a good investment if it is well managed and maintained. One of the greatest benefits of condo buying is foregoing ongoing maintenance, repairs and renovations that are necessary as a homeowner.

– A fix and flip investment in a condo may not be as lucrative as renovating larger properties but the cost and time expended on the project may make it a worthwhile investment.

To find out if a condo is a good real estate investment for you, contact the experts at Maxwell Realty Company.