12th January 2010

Why Condominiums Are A Bad Rental Investment

posted in Real Estate Investing |

Last month, while having lunch with an old friend, we had a discussion about the merits of buying condo units as a real estate rental investment. Having been a condo owner in the past, I can positively say that I will never do that again.

This subject could easily fill a book, so here are my reasons in bullet-point form:

  • Too many complaints from neighbors. Tenants usually only sign a year lease so if they annoy their neighbors, they can simply move. The neighbors then transfer their frustration and annoyance to the landlord.
  • Condo Associations. If you like to invest by committee, condos are for you. Don’t want to afford that fat assessment to resurface the parking lot right now? Too bad. Pay up.
  • Condo Commandos. These people are usually retired and have nothing to do all day. Nothing, except get all up in your business that is. They feel that you as a landlord are devaluing their property by renting your unit and they won’t let you forget it.
  • No cost controls. Between assessments, community equipment (laundry, elevators, etc) repairs and joint utilities (water, electric, garbage) your monthly condo dues could fluctuate wildly and there’s nothing you can do about it short of buying the majority of the units in your condo complex so your vote has enough weight to tell them you don’t want to pay.
  • The condo association can take possession of your unit by law. Besides the county tax collector and Internal Revenue Service who threaten to take your property (unit) if you don’t pay them, surprise(!!!), the condo association can and will do this also if you don’t pay them.

And that’s not to mention the situation where some incompetent condo president decided to allow a few owners to claim on the association’s insurance policy unnecessarily. Now no insurance company will insure the association and they had no choice other than to buy a policy from Lloyd’s of London.

For anyone who doesn’t know, Lloyd’s of London will practically insure anything but you’ll pay dearly for it. Want to insure your cat against being struck by lightning? Call Lloyd’s. You’re Mariah scary Carey and you want to insure your legs (of all things) against damage? Call Lloyd’s.

I’m sure there are other reasons but those are the major sticking points for me. Investor beware.

There are currently 5 responses to “Why Condominiums Are A Bad Rental Investment”

Why not let us know what you think by adding your own comment! Your opinion is as valid as anyone elses, so come on... let us know what you think.

  1. 1 On January 12th, 2010, Clifford said:

    These are exactly the same reasons I gave years ago when buying investment property. I think many investors believe these are the cheapest (ergo) best way to get into investing. But I’m about mitigating risk and for me, condos present too many variables above and beyond what a regular house would present.

  2. 2 On January 12th, 2010, TheLandlord said:

    Hey Cliff! Glad to have you back! I’m glad for the agreeable comment. I was expecting a huge tizzy from the apartment building owners….but none as of yet have commented.

  3. 3 On January 12th, 2010, Gary Waters said:

    As a real estate agent I can certainly agree with you. Condos are best left to owner occupants who are willing to gamble that the expenses will remain in check as will as a high owner occupancy rate!

  4. 4 On February 5th, 2010, Spicer Matthews said:

    I have made this mistake twice in my life. I will never do it again!!! Condos are tough to own even if you are going to live in them. The dues can be killer if they go up faster than your property value.

  5. 5 On February 7th, 2010, Tyler said:

    Absolutely agree. Single family and small multifamily real estate investments are what individual investors should focus on.

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