6 Factors to Consider When Deciding to Invest in a Condo in 2019
As you consider the various types of properties that are available for investment, you may be wondering whether condos will make a good investment in 2019. While there is no way to guarantee that your condo investment will be a good one, here is a look at a few of the factors you should consider in order to determine if investing in a condo is right for you.
Condo Association Restrictions
Purchasing a condo comes with its own set of restriction that you may not be used to encountering with other property types. Be sure to examine the condo association’s restrictions carefully in order to ensure they will not get in the way of your investment strategy. While a condo located in an upscale area or in a popular vacation destination may make for a great short-term rental opportunity, you may not be able to rent the unit out freely. This is partially due to the fact that your condo ownership involves shared space with other condo owners in the community.
Generally speaking, condos are less expensive to purchase than single-family homes, which means a condo can be a safer investment in terms of the amount of financial risk. In addition, the lower cost means you will not have to juggle as big of a financial burden while your property sits empty in search of a tenant. This also means you are less likely to be put in a financial bind if your condo sits empty for a period of time at a later date.
Obtaining a Mortgage
While condos are generally less expensive to purchase than single-family homes, it can sometimes be more difficult to obtain a mortgage loan for this type of property. Therefore, if you are considering purchasing a condo for your investment property, you will need to be prepared to jump through some extra hoops before you are approved for the loan.
The Federal Reserve is raising interest rates for the US housing market in 2019, but these increases will not be as dramatic as they were in 2018. Therefore, you will need to be sure to consider the increased cost of interest when budgeting for your purchase, regardless of the type of property you are purchasing.
While condos typically do appreciate in value, they tend to appreciate at a much slower rate when compared to single-family rental properties. Therefore, if you are looking at the investment is something that you will flip in a few years for a profit, you are not likely to see the profits you hoped to get. If, on the other hand, you are looking for a long-term rental option, the slower appreciation rate may not be much of a factor for you.
Tax breaks are among the benefits that you enjoy as a real estate investor, but you might be surprised to learn that not everything is tax deductible with a condo. While you can deduct the cost of repairs and other expenses paid toward maintaining the condo, things such as condo fees are not deductible.