Condos as investment properties - Posted by Jason R

Posted by Gil on July 08, 2002 at 14:31:42:

Hello Jason R,

Condo’s typically do not appreciate as well as SFH, but they are easier to upkeep sometimes. Remember that w/ Condo’s, you have additional fees like HOA home ownership association. Make sure you are aware of this before you invest. THis will affect your Return on Investment.

As far as tax benefits, I don’t see any major differences from what I have been dealing w/. :slight_smile:

Best Regards,


Condos as investment properties - Posted by Jason R

Posted by Jason R on July 08, 2002 at 14:23:55:

Does anyone have an opinion on Condos as an investment (rentals)? I am curious because in my area (indiana) I have found several condos with decent locations, in good shape and with low prices (about half of what newer condos are selling for). These condos are mostly 2/1 (some 3/2) and are selling for $30-40K and the rents they are bringing in are between $550-$650.

Also, do condos appreciate in value as quickly as single family homes and do you also get the same tax benefits? If anyone has any experience with condos as investments I would appreciate their input. Thanks.

Jason R

Re: Condos as investment properties - Posted by Ronald * Starr(in No CA)

Posted by Ronald * Starr(in No CA) on July 08, 2002 at 21:22:55:

Jason R–(IN)--------------

Two more points: some lenders will not loan on condos if there are too many renters and not many owner-occupants. Be sure you check out the situation vis a vis the number of renters. Often projects with more than 1/2 renters are not kept us as well as those with mostly owner-occupants.

Actually, tax benefits will probably be somewhat better for condos. The depreciation–a fictional expense, which you can actually write-off your taxes–is based on the purchase price of the improvements, excluding the land. When you buy a single family house, part of the purchase price will have to be allocated to the ground which can not be depreciated. For the condo, you probably can depreciate the whole of the purchase price. Or most of it, anyway, since your land ownership is not worth much, being at most a very small undivided fraction of the property under the condos. You probably will want to check with an accountant on this issue. I am neither an accountant nor an attorney.

Good InvestingRon Starr

Re: Condos as investment properties - Posted by GL(ON)

Posted by GL(ON) on July 08, 2002 at 18:49:06:

Condo townhouses make excellent investments for the reason you discovered: They sell for less than a house but you get almost as much rent. Therefore you can get good positive cashflow and hold on for the long term.

I know at least one investor who has made millions off condo townhouses.

You have to look out for a bad or expensive condo association. For example the water situation described in another post would never have happened to a good management, they would have collected the back fees or siezed the condo.

But if the condo association is good, they take most of the maintainance burden off your shoulders.

As far as appreciation goes, in my experience they go up as much as a house on a percentage basis, and in some cases match them dollar for dollar, even though your buy in is less.

Also buy the 3/2 condos. They rent easier, for more money, to more stable tenants. Only take the 2/1 type if they are a real steal.

Re: Condos as investment properties - Posted by Tim (Atlanta)

Posted by Tim (Atlanta) on July 08, 2002 at 14:36:36:

Condos can be a good investment, but you must take care when selecting the right condo.

One issue is the condition of the association. Does the association have a policy against rentals? Is the association in good condition with a healthy reserve? What does the association pay for?

Here in Atlanta there is a set of condos where the association pays the water bill. Some of the owners decided not to pay their association dues. Thus the association can’t pay the water bill. This situation continued until recently when the mayor’s office told the water servicing company to clamp down on late payors. The association was the top of the deliquent list with a total bill over $500,000.00. The company cut off the water and the residents have been without water for the last week. The local news stations have picked up the story of how these poor residents are getting screwed by the water company. It is likely the association will declare bankruptcy to avoid the bill. So the lesson to be learned is that you should never buy into a condo complex where the association pays for any critical services.

As far as appreciation goes, don’t count on it. Make sure that the condo cash flows well from day one. If it does appreciate, that is great, but condos don’t traditionally appreciate nearly as fast as the SFH. Also condos are harder to sell. You get the same tax benefits whether you choose a SFH or a condo.