When you’re ready to invest, you may consider purchasing a condominium as an investment. But are condos a good investment? Let’s take a closer look.
Factors that may or may not make a condo a good investment
There are a number of factors that contribute to whether a condo is a good investment. In addition to considering the sale price of the condo, you’ll also want to take into consideration the other costs associated with owning and managing a condo, and you’ll want to know specifically what those costs and potential sources of income are, so you can determine your potential return on your investment, if any. Here are some of the items you’ll want to add up.
Does the condo association allow rentals
Your ability to rent out your condo is key to whether your investment will pay out. Several condo associations only allow for owner-occupied units, so renting one out may not be an option. This is common and explains why investment condos are few and far between. Most investment condos are otherwise known as apartments, and the landlord happens to own the entire multi-unit property.
Potential sources of income from a condo investment
Before you start adding up the potential income from your investment condo, it’s essential to take a step back and ask yourself a few questions. First, is the condo located in a desirable neighborhood for renters, and is it likely to be in demand? Is the area changing and becoming less desirable, for whatever reasons? Is another development coming in that will compete with the building your condo is located in, requiring further investments into the property? Is a major business or employer closing, which could drive down potential rents? These are all risks you must weigh and measure as a potential investor. If it all checks out, then you’ll want to consider your potential income from the property. That includes:
Let’s say you know your property will likely pull in $1,000 per month in rent, or $12,000 per year. Now, it’s time to factor in potential expenses.
Potential expenses associated with a condo as an investment.
You’ll find a multitude of potential and likely expenses associated with owning a condo as an investment property. Here are a number of items you’ll want to add up to determine your possible ROI.