Condominiums haven’t always been the most desirable property type for real estate investors. They are sometimes more difficult to finance compared to single-family homes, and they might come with association dues that can be burdensome and unpredictable. There are, however, plenty of reasons for investors to at least think about buying condos.
The biggest reason to look into a condo as an investment is the purchase price. The acquisition cost of properties is the No.1 barrier to entry for beginning real estate investors, and condos or townhouses are typically less expensive to buy than single-family homes or multi-family properties.
In San Jose, the median price of a single-family home sold in the first quarter of 2021 was $1.23 million. In the same time period, a condo or townhome sold for a median price of $732,500, about 40 percent less than a typical single-family home. It’s little wonder, then, why a San Jose property management company would be managing condos for rental owners.
Other than the purchase price, there are a few other reasons why investors should consider buying condos.
Condos usually come with fewer maintenance requirements than single-family homes. It can vary a little between condo associations, but usually, a condo unit’s exterior is maintained by the association.
When that’s the case, it means the condo unit’s owner doesn’t need to worry about having to eventually replace a roof, paint or replace siding, put in a new driveway, or do much in the way of landscaping or yard work. Roof, siding, and driveway replacements are major costs for owners of single-family properties.
With less responsibility for maintenance overall, a rental condo can be a more passive investment for the owner. If you were to hire a San Jose property management company to manage the property for you, it would be almost completely passive.
Lower Regular Costs
Condo association fees can be high, but they usually cover at least some expenses that the owner of a single-family rental might regularly incur.
Insurance, for example, is usually provided by the association for the exterior of the structure, which means investing in a condo doesn’t require the extent of coverage a single-family home would.
It depends on the building where the unit is located, but some condo association fees also cover trash pickup, water bills, pest control, landscaping, and recreation areas. With a condo, you might be able to offer tenants an amenity such as a pool without having to maintain or insure it. A property management company that markets rentals for investors can use such perks to attract more tenants and rent a unit more quickly.
Even though a condo could cost 40 percent less than a single-family home to buy, it might be rented at a rate comparable to a larger, more expensive single-family home. One of the reasons for this is that when it comes to real estate it is all about location, location, location.
Often, condos and townhomes are found in locations where single-family homes are in short supply. Properties closer to downtown, or closer to public transportation, or in a vacation destination often rent for as much or more than their single-family counterparts that are located farther away from urban hubs or tourist spots.
If a property generates the same rental income (or more) each month for the owner and comes with a lower acquisition cost and lower ongoing expenses, it’s definitely something for an investor to consider.
Valley Management Group has been providing trustworthy and affordable property management services for over 40 years for rental owners in San Jose and Santa Clara County. If you are looking for property management services for a rental in Santa Clara County call us today for a free property management quote and one free month of services when you sign up.
Reviewed and Approved by Lloyd Kipp
Property Manager and Owner of Valley Management Group