Owning a condo for rental purposes can be a smart investment opportunity. However, investors must be willing to put in the time and effort to manage their property. If so, condos for rentals are an excellent way to diversify your real estate portfolio.
One of the reasons why many choose to own condos for rentals includes the lowered costs. Namely, turning a condo into a rental property costs far too less than buying a house. So that begs the question, is owning condos for rentals a smart investment? Let’s find out.
3 Reasons Why Condos Are A Smart Investment
Condos offer real estate investors several benefits. Therefore, we can answer the question by looking at the following three reasons.
- Low Maintenance Costs
One of the reasons you should consider owning a condo for rentals is the low maintenance costs. Unlike traditional rental properties, which often require extensive repairs and upkeep, condos typically have a homeowners association that takes care of common areas and exterior maintenance.
This means landlords can spend less time and money on maintaining their property and instead focus on finding and retaining tenants.
- Big Rental Demand
House prices are getting ridiculously high. So what do people who can’t afford a house do? – They rent. That’s where rental condos come in. Renters love condos, particularly in urban areas.
As we all know, cities are getting bigger and more crowded by the year. So space comes at a premium. Condos are smaller and often in desirable locations. They are especially appealing to students, young professionals, and people that live alone. Landlords who own condos in popular areas can often command higher rents, leading to increased profitability.
- Long-Term Value
Finally, owning a condo for rental purposes can be a good long-term investment. As the value of real estate tends to appreciate over time, landlords who hold onto their property for the long haul can potentially see significant returns on their investment.
So for eager real estate investors looking to diversify their portfolio, consider owning a condo for rentals.
3 Challenges Of Owning A Condo For Rentals
Investors should know several challenges before diving into the condo rental world.
While owning a condo for rental purposes can be a rewarding experience, it’s important to be aware of the challenges that can arise. So let’s do that to get a sense of whether or not condos are a smart rental investment.
- High Tenant Turnover
One of the main challenges is finding and retaining tenants. High tenant turnover isn’t anything new in the world of commercial real estate.
While every landlord should screen tenants to determine their financial situation, landlords must also be aware that tenants come and go.
One thing landlords can do is look for tenants who will pay at least three months in advance to know they’re serious.
- Marketing the Property
Every landlord should be aware of the marketing challenges associated with rental condos. While there is no shortage of websites to market your condo for rent, remember you’re competing with every other landlord in your city.
That means landlords must consider their marketing efforts and do better to get the most desired tenants.
- Managing the Property
Landlords must also learn how to manage their rental condos. Fortunately, owning a condo for rental involves less management than traditional rental properties.
For example, landlords must determine fair market rent even if condos are in high demand. You must also be prepared to evict a tenant who doesn’t play by the lease rules.
Lastly, landlords must be prepared to handle any maintenance or repair issues that may arise, even if these tasks aren’t their responsibility.
To summarize, owning a condo for rental purposes can be a smart investment for those willing to do the work. With low maintenance costs, big rental demand, and the potential for long-term appreciation, condos offer several benefits for landlords.
However, it’s important to know the challenges that can arise and to be prepared to put in the time and effort required to manage a rental property.