Family Homes: Are Condominiums Good Investments?

This article covers the pros and cons of investing in condominiums.

Condominiums very often can be good investments, but the purchasers should consider several important aspects of condominiums before making a purchase. Condominiums are a good way to build equity, and therefore often offer an alternative to renting an apartment, but there are some negative aspects of purchasing a condo.

Condominiums are unique properties in that they allow the buyer to purchase an area of space within a building that he does not actually own. The owner of a condominium is therefore liable for maintenance and repairs on the inside of his condominium, but the maintenance and repairs to the outside of the building and surrounding grounds is the responsibility of the governing association. Condominium associations charge monthly fees for maintenance and repairs to the building and grounds, and decisions are voted on by the association members (condo owners). This means that the purchaser of a condominium does not have absolute authority concerning his purchase. The association fees vary between condominium neighborhoods, but usually are at least $150 per month. This amount should be added to the monthly mortgage payment secured for the property to determine the total monthly cost to the condominium owner.

Another important factor to consider in determining if the condominium will be a good investment is the location of the building. If the condominium is located in a growing or prosperous area, it will very likely increase and make for a good investment. If the condo is located in an area that typically attracts a large number of tourists, it may be rented for extra income. Therefore, location is a key consideration. There are numerous condominiums located atop buildings overlooking busy streets in large cities. These units may not have the rental value of a condominium on the beach, but they will likely increase in value. Many popular beaches are lined with condominium buildings. The units in these buildings are typically sold to individual investors or to groups of investors as timeshares. Beachfront property typically increases in value, and demand is often high for beachfront condominiums. These condominiums are probably the best investments.

Other condominiums are located in or very near large cities, but are not set atop skyscrapers, like luxury condominiums. The investment value of these properties often depends on the neighborhood in which they are located. If the neighborhood consists of primarily nice single family residence and business, the condominiums will probably maintain or increase in value. If the neighborhood consists primarily of poorly maintained homes and apartment buildings, the purchase of a nearby condo could be a risky investment.

Another factor to evaluate when considering the purchase of a condominium is your specific reason for making the purchase. Purchasing a condo is usually a good option if you are currently renting an apartment or house and you want to use your money to build equity in a property you hope to later sell. This allows you to develop ownership interest in the property for a price that is usually comparable to apartment rent. Purchasing a condominium might also be a good option if you are unable, or unwilling to properly care for a home. Condominiums owners typically enjoy access to well kept grounds, swimming pools, conference rooms, and common areas. The individual owners are not responsible for maintaining these amenities, but rather pay for the maintenance in the monthly association fees. This often makes condo purchase very attractive for individuals and families who are unable, unwilling, or too busy to maintain a home.

If you are considering purchasing a condominium to rent to others, you might often find that the purchase of a rental house is a better investment. Association fees are taxed each month regardless of the occupation or vacancy of the condominium. Therefore, you could face extra out of pocket costs in months when the property is vacant. Purchasing a rental house also allows the landowner more flexibility concerning the outer appearance of the property. The landowner can make exterior changes to a single family house to increase the rental value of the property. This option is typically not available in condominium buildings. Another consideration is that most houses appreciate at a faster rate than most condominiums. This is because a homeowner actually owns the structure and grounds, while the condo owner only owns space within the structure.

Condominiums can often present very good investment opportunities. The purchase of a condominium is almost always a positive alternative to paying apartment rent. Beachfront condominiums are often the best investments because beachfront property usually increases in value and is easy to rent. Condos located within inland cities may have good investment value depending on the neighborhood in which the condominium building is located.

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