Home or Condo? What to buy when you invest in a rental property?
5 Must Consider factors before you invest in a rental property!
What makes a better corporate rental: A single-family home or a condo? This is the million-dollar question in corporate housing, and it’s just one of the considerations to make when deciding the right type of corporate housing investment property for you. Obviously, there are many other factors, too, so do your homework and take a “gut” check to find out what kind of investor you are and what type of property works best for you.
Consider these factors when making your decision:
Single-family homes typically require extra upkeep and maintenance (especially if they’re older). They require regular yard maintenance, exterior painting, roof repairs, etc. On the other hand, condos only require maintenance within the unit. Generally, the upkeep of the exterior and common areas is maintained by the Homeowners Association (HOA) and is part of the monthly assessment. Condos create reserves from HOA fees to manage major exterior updates or repairs (i.e. a new roof).
Single-family homes come with monthly costs like trash, heating, water, lawn mowing, etc., and each needs to be paid separately. The good thing is that some of these costs (such as heat and water) will fluctuate depending on the season and the occupancy. Your costs will vary depending on whether your home is vacant, has one tenant, or has multiple tenants. Condos require you to pay a monthly assessment, regardless of whether someone is living in the unit or not. However, most condos include heat, exterior maintenance, trash, building insurance, and water in their monthly fees.
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Generally, single-family homes take more time to manage and require a more active, hands-on investor. There are a lot more things that require upkeep and maintenance in a home than in a condo. For investors with little time, a condo can be a great, worry-free way to go.
While resale value depends on the location, single-family homes are typically easier to resell and hold their value over the long-term. A condo building with 500 units may have 10+ units for sale at any given time, making it difficult to sell your unit at a competitive price.
Is your goal to build equity in the property? Create a positive monthly cash flow? Create the biggest tax deduction? Have a property you can use from time to time? Simply rent until the real estate market gets better? Make sure you are clear on your goals, particularly what you expect to get out of the property and why. These answers will allow you to make a better assessment of your success at the end of the year.