Investing in condominiums is one of the most profitable strategies in the real estate industry. It is suitable even for novice real estate investors. Nowadays, the demand for this type of property is quite high among the tenants. Besides, it is easier to manage condominiums than other types of real estate.
This article will help you to navigate the housing market and avoid some pitfalls before investing. We will consider some valuable tips and some best practices that beginner investors can apply before purchasing a condo. Also, you will find out the benefits of buying the condominium as an investment property.
Generating income from investing in condominiums is usually based on the chosen strategy. Investing in condominiums can be a good way to gain positive cash flow, but the beginner investors need to examine the housing market thoroughly. In this article, we will review some tips for novice investors that will help you to avoid the most common risks in this matter and make a good transaction with the dealer of real estate.
Firstly, let us revise the meaning of the term. Condominium or condo is a type of real property. The condo is similar to the flat in the block of apartments, but these two types of real estate have some vital differences. The condo is characterized by the rich infrastructure and specific form of ownership.
Condominium Investing: Pros
The condominium investments have a wide range of advantages over the other investment properties, like a house or an apartment. Let us consider the main pros of condominium investing:
- A lower amount of finance for repair, in comparison with other types of real estate;
- High demand for condominium rentals due to the urbanization process;
- More possibilities to find tenants, compared to commercial real estate;
- A great number of renters are attracted by the shared amenities;
- Greater affordability for tenants, if to compare with single-family homes;
- A simple process of upkeep and maintenance.
Thanks to the benefits mentioned above, it will be easier for the investor to decide on the purchase of the condo. Next, we will describe the useful tips for every investor who is buying the condos to rent it out.
7 Tips for Beginner Investors
To get started, you need to understand the significant tendencies in the real estate market. Putting money into real property can challenging for new investors. Still, if you are familiar with the core concepts and emerging potential risks, you can be sure that your investment will be a success.
1. Invest In a Good Location
Location is the number one thing regarding real estate investing. An excellent location defines the future profitability of your property for rent. The same rule is true for condominiums. The proper location is a guarantee that potential tenants will be interested in your property for rent. Further, we are going to list the points that are the identifiers of a suitable location:
- Pick the location that is close to the transportation hubs;
- Choose the areas with amenities like restaurants, shopping centers, and restaurants;
- If your intention is to rent out the property on Airbnb and similar platforms, look for the areas with the potential to attract the constant stream of tenants regularly.
2. Choose the Properties with a High ROI Index
The first step in making a good investment is to choose the appropriate real estate market. However, this act does not necessarily mean that your investment will be beneficial. The next thing to consider is the potential return on the property.
The essential features that matter when buying a condo are the quality of amenities, the number of rooms and bathrooms, and the possible access to storage and parking lot. These options will increase the price of the rent.
3. Investigate the Less Popular Financing Methods
One of the pitfalls of financing the condominiums is the type of financing. Condos are usually treated differently by lenders than other mortgage types. For instance, if your aim is to obtain an ordinary loan for a condo, you will face a great number of restrictions and requirements. The essential prerequisite for most loans is the location in the apartment complex with proper insurance.
In order to address this problem, the investor may use non-conventional financing approaches like hard money loans of private financing. Due to these methods, you will be able to cut a deal on more favorable conditions.
4. Consider the HOA Regulations
It is important to note that every novice investor who chooses the condo for the first investment should take into consideration certain regulations from HOA or homeowners association. These rules include various issues, like building restrictions, resident behavior, fees, and responsibilities.
Some regulations apply to rental properties, and others prohibit short-term stays. The strictness of these conditions is different for various condominium complexes. Due to this reason, it is essential to explore the regulations from the homeowners association before buying the investment property.
5. Carry Out the Inspection of the Property
Though this step may seem obvious, some beginners in real estate investing skip it often. We recommend you examine the property thoroughly before making the investment. The inspection gives you a clear understanding of the major issues concerning your property and the items that need to be replaced or require maintenance.
It is better to use the services of the professional real estate inspector. This person is responsible not only for checking the condition of the premises, but also can give you some vital recommendations on how to prepare the condo for rent. There are three main areas of real estate inspection: visual inspection, discussion, and post-inspection consultation.
During the visual inspection, the specialist examines the property with a client. The next step is the discussion of the most important details and creating the checklist of the items. Post-inspection consultation is not mandatory. However, it can clarify some points.
6. Hire a Real Estate Agent
The idea of reducing the overall expenses by saving on the real estate agent fees may seem quite attractive. However, it may have serious consequences for beginners. Dealing with condominium rentals involves solving many complicated issues and working with a great number of documents.
Hiring the real estate agent or realtor will keep you away from troubles and will be useful during the whole purchase process from negotiations to closing the contract.
7. Develop the Marketing Strategy
The proper marketing strategy means a lot in terms of renting out a piece of real estate. Your advertising method will attract the tenants to your rental property. Various marketing strategies will help you to rent the property, like identifying the target renters, using traditional methods like word of mouth, applying social media marketing, visiting specialized networking events, and many others. You can use any of these methods separately or use a combination of the approaches.
The Bottom Line
If you chose the condominiums for investing, it is important to take into consideration some potential risks and mistakes that may arise on the way of the novice investor.
The major factors that define whether your investment will be successful or not are the location of the condo, high return on investment index, the suitable financing method, the thorough inspection of the property before the purchase, and the chosen marketing approach.
The condominiums have a lot of advantages as the investment property, like high demand, simpler maintenance process, greater affordability for tenants, good infrastructure, and shared amenities. Despite this fact, you do not need to forget about the pitfalls like the regulations from the homeowner association concerning the rents, the difficulties in financing, and the risks.
If you prepare a plan, consult the professionals in the real estate industry like skilled investors and realtors, use the above-listed tips, you will certainly achieve your goals in real estate investing.