Real estate investment can be very profitable but be sure to look into these three factors before you decide to purchase a condo instead of a single family home. On the one hand, condos are generally less maintenance than homes. On the other hand, if you don’t do your research before purchasing a condo without looking at the Home Owner’s Association (HOA) rules, regulations, and bi-laws, you could potentially have an investment that will loose you money over time.
An article on InsideRealEstateNews.com written by Harvey S. Jacobs, a real estate lawyer, gives some excellent tips of what needs to be researched prior to closing on an investment condo.
- Have a professional home inspection prior to buying.
- Look over the condominium complexes financial statements. This will give you insight into the complexes reserve account they have on hand in case of repairs and maintenance that needs to be done. Look for a complex that has sufficient reserves so you won’t get a special assessment that will end up costing you more.
- Read all of the legal documents including the bi-laws, declarations, and house rules.
- Declarations go over the specifications of your condo’s dimensions and will also tell you the condominium complexes common areas (hallways, outdoors, lobby, stairwells, etc. – basically everything that is used by all condo owners within the complex).
- The bylaws cover the HOAs rules for annual meetings, officer elections, board of directors, etc.
- The house rules are for both home owners and tenants alike and cover things such as the pet policy, move-in/out policies, noise violations, length of lease terms, etc. You will want to make sure and read these carefully as some are unfavorable when you are trying to make the condo into an investment.
One benefit of owning a condo which undoubtedly has an HOA managing the property is that you only need to take care of the interior of your condo, the HOA covers the rest. If any repairs need to be scheduled, they take care of contracting out the work.
When determining if a condo is going to have a positive cash flow and be a sound investment for you, make sure to factor in the HOA monthly dues with the cost of your mortgage (principle and interest), property taxes, and home owners insurance. Also, HOAs can raise their monthly dues each year so be sure you are aware of this. It is strongly recommended that you get involved with the government of the complex. Become a member of the board of directors. If that is not a possibility, be sure to attend all of the meetings and get to know your neighbors. There is also a great book by Patrick Hohman Condos Townhomes and Home Owner Associations: How to Make Your Investment Safer that will give you more information about investing in a condo/town home and dealing with HOAs.
When you decide to purchase an investment property, we can manage your property on your behalf and ensure that you are maintaining at least an 80% occupancy each year. Plus, we handle any and all maintenance items, deal directly with the HOA, collect all rents, negotiate lease contracts with all tenants, issue a 1099 each year with your earnings, and much more!