A condominium is a cross between an apartment and a house. You buy and own it like a house. Yet, it's like an apartment because you live close to your neighbors. You may share a wall, or live above or below another resident.
Usually, a condo costs less than a single family home. A single-family house on a popular beach may cost millions. Yet, a condo in the same location can be half the price.
The condo may include extra amenities like a pool, clubhouse, and walking trails. The lower cost and extra features make a condo very appealing. But, are condos a good investment?
The first step is to consider how you will use the condo. Will it be your primary home? Do you plan to use it as a vacation home? Or, will the condo be a rental investment? Different uses will impact your decision.
Keep reading to see if a condo is a wise investment for your situation.
Are Condos a Good Investment?
The best return on investment for a condo comes from buying low and selling high. This is easiest if you buy your condo during the development phase in a popular market.
Another option is to buy a condo in foreclosure. If you win the bid you could own a condo in a great location for a lower price. Be prepared to spend money to correct any problems with its condition.
Another way to make money on a condo is to rent it. Let's look at the financial considerations of a condo as a primary residence, and as a rental property.
Primary Residence or Rental Unit
Many of the positives associated with condos apply whether it's used as a rental unit or a primary residence. There are some expenses related to tenants when a condo is a rental unit. We'll cover those later in this article. First, let's look at financial considerations for either type of condo owner.
Assessments and Homeowner Association (HOA) Fees
If your condo has association fees, ask how often they assess the property. Assessments are charged to ownership to cover the cost of maintaining common areas. They can include groundskeeping, parking lot, and exterior building maintenance. Entrance areas and lobbies may be included.
Condo fees can range anywhere from $100 to over $1,000 per month. The amount depends on the location and type of condo. A luxury condo has higher fees than a no-frills building.
Once you figure all your expenses you'll know if your condo is a worthwhile investment. After you figure potential expenses, deduct them from the annual rental income to calculate net rent. If it's an attractive return, it's a good investment.
Does the Building Have Pending Litigation?
Before you buy anything, check records for any pending lawsuits. HOA litigation issues can be minor or major. It could be about unpaid member dues or a construction defect. Either way, make sure you understand what's at stake.
Not every lawsuit will effect a sale. But, it's a good reason to reconsider your purchase. You don't want added expenses after you move in.
Does the Unit Require Major Repairs?
Find out if the unit you want to buy will need repairs. A coat of paint or new floors aren't a deal-breaker. Structural damage, however, can be serious.
Meet with the current owner or condo association to assess the situation. Hire your own inspector to examine the integrity of the unit. You don't want to buy a unit that requires major expenses before it's ready to rent.
Location
The next step is to examine the viability of the location. Is your condo in an area with high rental demand? A vacation hot spot or nearby university increase the potential for constant rentals.
Look at the pros and cons of the neighborhood. Are you counting on a major employer for your tenants? What if the business moves or closes?
Are newer condos or apartments being built near yours? If so, you may need to upgrade your condo to stay competitive. You'll need to add the cost of improvements to your expenses.
Other things to consider is proximity to the water. A condo with water views commands higher rental fees than one 10 blocks from the beach. It's essential to buy a condo in a popular location.
Try to find a place near the water or entertainment destinations to stay in demand with renters. You'll have an easier time getting tenants. Don't rule out up and coming parts of the city as a viable option.
Ask local experts what they think of the area. It's vital you assess the popularity and viability of a neighborhood before you invest there.
Low Maintenance
A condominium is a great choice for someone who doesn't want to take care of maintaining a home. It's a great advantage if you despise yard work.
The condo association arranges for property upkeep. This means roofing, exterior painting, and common areas like a pool, tennis court, or clubhouse.
It's important to note that the low maintenance advantage is only for common and exterior areas. The inside of any condo is the owner's responsibility. If you have issues with plumbing or air conditioning, you must pay for the repairs.
Amenities
The amenities you get with a condo are often unpractical, or too expensive to add to a single-family home. A condo may have tennis courts, golf courses, fitness centers, and indoor swimming pools.
You can afford these luxuries in a condo because you share the expense with the other owners. These features are excellent enticements for rental tenants.
Sense of Community
Many people become more sociable when living in a condominium setting. In a condo, you see your neighbors in the elevator, lounge, and lobby. You interact at the pool or fitness center. Some communities plan social events for residents.
If your condo is in an interesting neighborhood you may socialize at local bars, restaurants, and parks. This is different from single-family homes. In some places, people drive into a garage at night and stay out of sight. Some neighborhoods with fences and large lawns seem to discourage interaction.
Look for a condo with a large percentage of owner-occupied units for a more social setting. But remember, you can't pick your neighbors. If you don't get along with someone you'll still see them in the condo.
Less Privacy
The flip side of the social setting is condos may offer less privacy than a detached home. You're living close to your neighbors. If they're noisy, or your unit faces the main walkway, it could be irritating.
One solution is to choose an end unit. It may cost more, but you'll have more privacy if you only share one wall. You'll definitely recoup the extra cost if you sell the unit later.
Units with the most privacy may be far away from common areas like the pool, parking, and mailboxes. Think of the extra distance as built-in exercise.
Less Storage Space
It's the age of minimalism and downsizing, but you still need space for your stuff. It's important to calculate how much space you'll give up when moving into a condo.
You'll need to organize and store things efficiently. A condo doesn't have as much storage space as a stand-alone house. Plus, many HOAs restrict the size of outdoor storage. For example, you may only be allowed to have a shed that is 30 square feet. Read all the HOA rules before you buy.
More Rules and Restrictions
Some HOAs regulate everything. Owners can't back cars into parking spots. You may need permission to decorate your outdoor patio. No hanging laundry in the sunshine.
Be sure you know the rules before you buy a condo. That way, you won't encounter any unpleasant surprises (or fines) once you move in. It would be a shame to buy a condo in a community the prohibits pets the size of your dog.
Resale Value
Sometimes, condos don't sell as easily as houses. It depends on supply and demand in the neighborhood, as well as at the things we've already discussed here.
You can have the best condo on the block, but if lots of your neighbors are selling you may have a hard time competing. Yet, if you have a condo available in a popular neighborhood, you should be able to sell quickly.
Next, let's examine additional concerns for a condo used as a rental unit.
Rental Property
If you plan to rent your condo year round, prepare accurate estimates for the following items.
Annual Rent
At first glance, the amount of rent you can charge may seem like easy money. Yes, you'll have rental money coming in, but you'll also have expenditures. You must consider every possible expense.
Taxes and Insurance
How much will you pay each year for real estate taxes and insurance? Break that number down into a monthly expense.
Maintenance and Repairs
Set aside money every month to cover any maintenance expenses. Tenants don't treat rentals as owners do. You'll likely need to make repairs.
Legal Fees, Tenant Damages
It's a good idea to earmark money for problems that involve legal fees or additional repairs. If you have to evict a troublesome tenant, you'll have legal costs. If a tenant starts a fire, you'll have additional repair costs.
Advertising
What does it cost you if the condo is vacant one month each year? If the condo is empty, you'll need to advertise for a new tenant. That's an additional expense.
Mortgage and Interest
Don't forget to add repayment and interest charges if you borrow money to buy the property. Your monthly payment goes in the expense column.
Will You Use a Management Company?
If you plan to be an absentee landlord, you'll need a management company. The manager can influence the success of your condo rental. Get referrals before hiring anyone to represent you to your tenants.
Make sure the management company you use is responsive and reliable. A company that stays on top of repairs inspires confidence and return customers.
Condo for Retirement
If you're close to retirement, you may want to sell your home and buy a condo. If so, carefully consider your budget. You should crunch the numbers to see if buying is better than renting in retirement.
Many retirees rely on pensions for income. If you don't have enough assets to pay for unexpected condo expenses, the cost could be overwhelming. As with home ownership, there's always the risk of costly maintenance. If you have assets, then it may not be part of your decision-making.
The benefit of being a tenant is you don't need to worry about market conditions. If you decide to move, you won't lose money on an investment. You can move without concern over how long it takes to sell your home.
A condo requires less physical maintenance than a home. But, it does have financial obligations. Examine your situation before buying to guarantee your retirement is enjoyable.
Find Your Condo in Myrtle Beach, SC
The beautiful weather and landscape make Myrtle Beach, SC a popular place. It's a wonderful destination for tourists and retirees.
Condos give people an excellent way to experience this popular area for less money. A single-family unit on the beach is expensive. People who can't afford to buy their own place love to rent one. Offer short-term rentals and you'll get lots of renters.
A Myrtle Beach condo appeals to families, couples, and individuals visiting the area. Treat them right and they'll come back year after year. Some people rent for weeks or even months. Repeat renters will think of your condo as their vacation home.
So, are condos a good investment? Yes, they're a smart way to get a return on your investment.
If you're interested in buying a condo in Myrtle Beach we'd love to help you find the perfect one.
Give us a call 843-839-9870 we will tell you what to look for and what to stay away from. We are here to help you avoid the pitfalls that are costly. Talk soon!