If you’re interested in buying a condominium as an investment property, there are a few things you should consider. Before you pull the trigger on your purchase, make sure you do your due diligence. By following all of the following tips, you can make sure you buy the best property for cash flow.
Location is Everything
When it comes to an investment property, location is paramount. You need to think about what you plan on doing with the property. If your goal is a short-term rental, pick a location that appeals to tourists. A condominium in a place with limited tourists will sit vacant for too much time to be profitable.
For long-term rentals, you need to assess the market around the property. What is the average rental rate for properties of a similar size? Pick a location that has decent rental rates and people looking to rent rather than buy.
Determine the Return
Buying a condo is a major investment. If you don’t want to make a poor investment, run the numbers. Figure out what your returns would be. As you crunch the numbers, think about maintenance costs, necessary repairs, and management costs. Individuals looking to flip a condominium also need to perform similar calculations.
It’s essential to determine your return on investment. If you’re not sure how to calculate the ROI, find an online ROI calculator and input the numbers. You need to have a rough idea of all the costs of owning the property and managing it as a rental or a flip.
Find Out the HOA Rules and fees
When you’re buying a condominium, you need to pay attention to HOA rules and fees. Some people shy away from condos as investments because of the HOA, but this doesn’t mean they’re a bad investment. You simply need to do the research to determine whether or not you can work with the HOA.
Some condos don’t allow rentals, while others have favorable laws that make renting easy. The same is true of the HOA fees. In some condominiums, the fees are too high to support the rental model. Do extensive research on the company that owns or manages the condo, and make sure you can work with their rules.
Don’t Skip an Inspection
One of the biggest mistakes you can make as an investor is to forego an inspection. There are many hidden issues that could cost you thousands of dollars and keep you from being profitable. To avoid as many surprises as possible, you need someone to inspect the property. Hire a reputable professional and use the results of the inspection to negotiate a better asking price. If the condo needs any major repairs, include those costs in your ROI calculations.
It is possible to purchase a condo without an inspection. If you’re making an as-is offer, keep your offer low enough to account for major problems. You might need to do mold remediation, plumbing repairs, and other costly projects.
Should You Buy a Condo as an Investment Property?
There are pros and cons to buying a condo as an investment property. With that said, it all comes down to making a smart investment. If you buy a property with a good ROI and low risk, you can enjoy being a profitable condo rental owner.
