10 Things to Know Before Investing in a Condo

In major cities, investing in a condo can be seemingly attractive, especially those that are located in high-rise buildings and prime-time locations in metro cities. For investors, having an asset that has a remarkable view and located in areas that are popular and convenient is a perfect recipe for a short term rental property.

Investing in a condominium can be an exciting opportunity. The financial potential and lifestyle benefits are worth it alone. However, before diving into this investment, it is crucial to be well-informed and consider various factors that can impact your decision. 

Here are ten things to know before investing in a condo:
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‍Homeowners Association (HOA) Fees: It's not uncommon to see the listing price of a condo and become overly excited. A lower price point in such a beautiful location and updated aesthetics is a win! However, what you see at first glance isn't always the case. Condos typically have monthly HOA fees to cover shared expenses such as maintenance, insurance, and amenities. It is essential to understand the fees and what they cover, as they can significantly impact your budget and return on investment.

‍Rules and Regulations: Before making plans for the space to be a rental property, it's best to check in with your HOA bylaws. Condos have specific rules and regulations set by the HOA that govern how residents can use and maintain their units. Review these rules to ensure they align with your lifestyle and investment goals.

‍Reserve Fund: While condos may be reminiscent of apartments, they don't quite run according to an apartment rental. If there are any maintenance concerns, they are, like a typical single family home, the responsibility of the owner. But, instead of having the funding at the owner’s behest, it is paid into by owners to the HOA. So, before purchasing a condo, having some insight about the health of the reserve fund can be beneficial. A well-funded reserve fund is crucial for the long-term maintenance and repairs of the condo complex. Inquire about the reserve fund's status and ensure it is adequately funded to avoid potential special assessments in the future.

‍Amenities: The amenities are the fish that will reel you in. However, know the conditions of the amenities before committing. Condos often offer various amenities such as swimming pools, fitness centers, and shared spaces. Evaluate the quality and condition of these amenities, as they can enhance the value of your investment and attract potential tenants or buyers.

‍Rental Restrictions: If you plan to rent out your condo, be aware of any rental restrictions imposed by the HOA. Some condos may have limitations on the duration or number of rentals allowed, which can impact your investment strategy. Some of the most common questions when it comes to renting a condo or any asset that's within an HOA are:

Is there a rental cap? 

How is it monitored? 

Is there a time frame for how long one property can be rented?

Financial Health of the HOA: The HOA is there for the residents in the community. There is often a board who communicates on behalf of the people. So, while it may seem they are removed from the community, they are actually there for the service of the community, which means as a potential member of the community it's important to know the financial health of the HOA. This information can be obtained by reviewing their financial statements and budget. A well-managed and financially stable HOA is essential for the proper maintenance and operation of the condo complex.

‍Insurance Coverage: Homeowner insurance is a requirement when purchasing a home. When buying a condo, it's pertinent to understand the insurance coverage, if any, that's provided by the HOA and what additional coverage you may need for your unit. Ensure you have adequate protection for potential risks and liabilities.

‍Resale Potential: As an investor, it's expected that the goal is to sell the asset at some point. Considering this, assess the resale potential of the condo from the beginning. Research the local real estate market, recent sales in the area, and the demand for condos. Understanding the market dynamics will help you make an informed investment decision.

‍Location: Location. Location. Location. It is a crucial factor in real estate investment. Evaluate the neighborhood, proximity to amenities, transportation options, and future development plans. A desirable location can positively impact the appreciation potential of your condo.

‍Real Estate Professional: Seek professional advice before investing in a condo. Consult a real estate agent, financial advisor, and possibly an attorney to ensure you have a comprehensive understanding of the investment and any legal implications.

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National Real Estate Management Group Can Help You Invest In A Condo

Investing in a condo can be a rewarding venture if approached with careful consideration and due diligence. Knowing the right questions to ask and the specifics to search for can be instrumental in the decision-making process. Understanding the role of the HOA, whether there are any rental restrictions, as well as the community expectations, can help determine if investing in a condo is ideal. It's also important to partner with a real estate agent that understands the process when purchasing a condo.

National Real Estate Management Group (NREMG) has a roster of agents who know the questions to ask as well as key principles to look for when searching for a condo to add to the investment portfolio. Contact us today and let's discuss the trajectory of your portfolio so we can help you reach your goals.