Is Buying a Condo A Good Investment? What You Need To Know
So what is a condo? Great question! It’s one of those terms that gets thrown around, but you may not actually know the difference between a condo or an apartment. A condo, which is short for condominium, is any housing where you have the option to own while being part of a larger unit or building. This is different than an apartment. Apartments are typically rented and condos are owned or leased. And with condos, you may own it only to turn around and rent it. So it is an investment. When going down the path of condo ownership, the inevitable question might be: is buying a condo a good investment?
Dealing with Boston property management on a daily basis, we come across a good amount of questions in regards 
to condo living. It is a valid investment option, but it isn’t for everyone. It takes some research and evaluation to decide how management of that investment will be done over time.
Table of Contents
- Pros and Cons of Investing in a Condo
- Factors to Consider Before Buying
- Alternative Investment Options
- Ready to Make the Most of Your Investment?
Pros and Cons of Investing in a Condo
It is quite important to weigh the pros and cons of course. Owning a condo could be a great decision that pays off for years to come. Or, if you don’t think about your own expectations and personal situation, it could be something you regret. So let’s tackle some of the things to consider to see if whether buying a condo is a good investment.
Pros of Buying a Condo
Investment Lower than Alternatives – Of course it varies, but oftentimes condos can be the more economical choice. In fact, if your mind is set on a particular location, owning a house could be nearly impossible from a financial standpoint. That’s where condos come in. Inherently condos are built in a consolidated way so that living spaces can be cheaper in highly concentrated (populated) areas. Trying to buy a house in downtown Boston? Good luck! But a condo in Boston? Maybe!
Less Maintenance than Alternatives – As opposed to purchasing or investing in single family homes, condos typically involve less everyday maintenance, as well as less maintenance in larger costs. You have access to a nice yard or other amenities without having to maintain those amenities.
Amenities – As for amenities, this is a big selling point for many people when it comes to investing in a condo. They come with great add-ons! This can include a pool, a gym, security features, and all sorts of things that just isn’t reasonable or financially possible with other types of housing.
Location – As pointed out, sometimes location is one of the biggest considerations when it comes to buying (and ultimately investing) in property. Do you really want to live in the hub of a city, get out there and be in the “middle” of it all? The location of the property might be very important to you, and condo living may be the best option to put you right where you want to be.
There is also just a lot of research that can be done. You’re keeping in mind any potential ROI for rental properties you are considering. Property values of different neighborhoods vary over time, so the more research you can do while keeping in mind the intricacies of that particular area will help in making the best long-term decisions.
Cons of Buying a Condo
Additional Fees – The moment you become a condo owner, you’ll notice the additional fees. While it helps to not be responsible for certain amenities, additional fees to maintain the amenities you are enjoying are common. You can chalk it up to being a condo owner or condo investor. If you have major issues with additional fees, a condo purchase may not be right for you.
Restrictions on Property – Perhaps the largest drawback to deciding whether buying a condo is a good investment is the restrictions. You’re part of a community. Many people might like that, but it also means abiding 
by community standards and rules. This is usually done through an HOA (homeowners association). This comes with all kinds of restrictions, such as building and customizing the home to what kinds of pets you can own. While many people are able to overcome these restrictions because the pros are so great, ultimately everyone has to decide how important those restrictions are to them.
Also, are you using the condo as an investment? Do you think the restrictions will prohibit you from renting the condo? Is buying a condo a good investment if finding renters will become too difficult because of the restrictions? That is certainly something to consider.
Limited Appreciation – This means that, while not always the case, many times a condo’s value does not increase very much over time. Certainly the value of condos can increase, and many factors are in play whether it will or not. But as a general rule, the value may not increase as much compared to the potential for other real estate, such as single-family homes.
Factors to Consider Before Buying
Investing in a condo is a major decision. If you weigh the pros and cons and ultimately decide that this is a path for you, then that is only your first step. There is more to do! This is no different than making any other major purchase. Research is a really good idea before making any kind of leap. Here are a few discussion points that you may want to have and topics you may want to research and explore before going too far down the path of any one specific condo.
The Neighborhood
Question. Where do you want to live? Also, and maybe more importantly, where do other people want to live? In debating if buying a condo is a good investment, one major consideration is the location of the condo and whether the neighborhood is a desirable one, both now and in the future. There is no way to be completely certain. Investing almost always comes with a certain amount of risk, since no one can predict the future. But with research you can generally sense whether a neighborhood is on the “upswing” or if perhaps it is a neighborhood that people are moving out of for various reasons. This becomes a general factor when thinking about property values, even with condos.
Condo Association
You can do research on the condo association that is there. How restrictive is it? Do you think it is well managed? Oftentimes you can look up meeting minutes from past years and get a general sense for the community there and what you think living there will entail.
Renter-to-Owner Ratio
This is an important factor that is always something to look at. We talk about a renter-to-owner ratio in regards to condo buildings because it can directly affect property values within that community. The FHA (Federal Housing Administration) requires that condos be at least 50% owner occupied in order to qualify for their mortgage programs.
As a general rule of thumb, an over-saturation of rentals in a community, particularly with condo communities, can and often does have a negative affect on the values of those homes. So consider carefully the amount of homes that are being rented versus owned in any one community.
Parking
Have you considered parking? When asking yourself “is buying a condo a good investment?” thinking about parking is a necessity, since it can affect the overall cost of that investment. If suddenly you factor in an enormous cost to park in a garage nearby, you may find that the long-term expenses of living there is more than you previously thought. Is there even parking available nearby at all, or is there a long wait list to even be considered? In some areas of Boston parking is notoriously bad. When investing in condos, often you’re talking about populated areas where parking is a major factor. Keep that in mind.
Alternative Investment Options
While you’re considering condos as an investment option, perhaps other options come to light. Whether you’re looking for specifically property investments or others, there are a number of valid possibilities to put your cash into. So what are some?
Other Types of Property
We went over the pros and cons of condo investment, specifically. How about other types of property? For example, multi-families homes are very common in many neighborhoods. And they can be a cheaper alternative than some of the other options because you can live in half of the house! Why not buy a duplex and then rent on the other side will help pay for your side.
Alternatively, investing in multi-family homes might generally be cost effective and common in your area of the city, even if you don’t want to live in part of it.
Another option could be land. Yes, raw land. If it is an area that is considered “up and coming” but isn’t residential or commercial property yet, you could get in on the ground floor.
And yet another option could be commercial real estate. Of course this comes with various pros and cons, but merely owning the property where stores and other businesses reside might be something you want to explore.
Small Businesses
Similar to investing in property, purchasing or co-owning a small business can be a large investment of both time and money, but it’s also something that could be attractive to many people who want to diversify. And there is the less monetary consideration, and that is, sometimes it’s just something you want to do. Every day people start small businesses that involve things they love.
Unlike owning property, this type of ownership involves a personal touch that many people can’t pass up. That said, the investment of time and energy is usually radically different and so it isn’t for everyone.
Commodity or Alternative Investment
What is this? Well, to truly diversify your investing, you can consider investing in things. Yes, things. One option for these “things” is what is called commodity investing. In that case these “things” are raw materials (gold or other precious metals), energy resources like oil or coal, or agricultural products (corn, wheat, etc.). Or you can make it more interesting by investing in tangible assets like cars, art, wine, or jewelry. Sound fun?
Ready to Make the Most of Your Investment?
Condo investing is tricky business. We know! So consider a management service such as Bay Property Management Group. As one of a number of choices for property management companies in Boston, we know you have options.
By choosing to partner with the experts at Bay Property Management Group, we act as a bridge between you and your tenants. We help make sure your investment is managed appropriately so you get the most out of it. Our dedicated team of leasing agents and property managers are with you through every step of the way. Interested in learning more? Contact us today for a free rental analysis and see how professional property management services can help!
