So you are thinking about adding to your real estate investment portfolio and debating what type of property to purchase. Let’s take a look at your options.
My first recommendation is typically a single-family home. It has been my experience that life is full of surprises and ever-changing, and I like to have investments I can sell quickly if need be. Historically, there are more buyers for single-family homes than for condos, apartment buildings or duplexes. If you need to sell a property fast, it is my opinion that there are more buyers looking for a single-family residence.
One thing to consider is vacancy. No rent means you will not be able to offset expenses. Prepare for this by making your payment a month in advance or having a savings set up for maintenance. Traditionally, the “American Dream” is homeownership. There seems to be more of a demand for a home without a neighbor connected to the property. A private yard for a garden, pet, pond, private pool or spa is an amenity most renters will pay more for.
In the event you are considering a condominium, keep in mind that community association rules can change. For example, one of my investors recently received a notice from the association board expressing its desire to require all units to be owner-occupied. Rules like this will directly affect the value of the unit to a potential investor.
You should also pay attention to the deferred maintenance of the building and the financial statement of the association. The roof, pool, pavement, paint and other structures and amenities have a certain life expectancy, and this could add up to a large assessment in the future. Another consideration is condo conversions. A community previously operated by a management company with set renter screening standards may be different now that the property consists of numerous owner-occupied and rental units. This could affect your property.
So an apartment building looks inviting? There is hope in always having some income to offset the expenses, and those expenses are multiplied when the roof needs to be resurfaced. Typically, when one unit has a problem with a hot water heater, air conditioner, heating or plumbing, it’s just a matter of time before those same problems occur in other unit. And these are not small expenses!
As time goes on and we purchase different types of property, we find what works best for us. I have owned all of the above and look at every investment with as many facts as I can gather. Inspections are important. I always recommend an inspection with an experienced company. Make sure to focus on potential problem areas, such as roofing and plumbing. Although inspection companies typically do not check such items, many will include them if you ask.
Additionally, when considering the purchase of a condo, do not lose sight of the fact that you are part of the association. The association implements assessments to cover big repairs when necessary.