Condo’s are the entry point to homeownership for many Americans. They’re cheaper than single family homes and can be easily rented out. For that reason, restless first time buyers who want to get into the real estate market love them.
There is a difference between buying a property for personal use and buying for investment. A condo is a great personal asset. It offers convenience and lifestyle that many people enjoy.
But are condo’s great for investment? Not quite. Condo’s have a lot of expenses. And the most variable expense comes in the form of homeowner association fees.
These fees are monthly payments that cover outdoor common areas like landscaping, window cleaning, pool, gym, etc. And over time these fee’s can increase. These fee’s are completely separate from your mortgage payment. So if you are looking to get the absolute highest return on your investment, paying another monthly fee cuts into any profits substantially.
Sophisticated investors rarely discuss condo’s as great investments. They’re great to live in if you use amenities. But if they’re not purchased at distressed prices, you won’t see strong returns after factoring in your expenses.