We write a lot about investing in duplexes, single-family homes, and multi-family complexes on our blog. Indeed, the values of single-family homes are steadily rising. And, as always, buy and hold investing is the only form of low-risk, high reward investing that exists. But we have thus far failed to examine a unique and, often, lucrative real estate investing niche: investing in Kailua Kona condos for sale. Thus, this week we will be exploring a few of the pros and cons of purchasing Kailua Kona condos for sale from an investor’s perspective.
If you cash-strapped yet dead-set on diving into the real estate market, investing in Kailua Kona condos for sale might just be your best bet for success. Those with measly cash flow and dwindling credit will meet with far fewer financial obstacles by choosing to invest in Kailua Kona condos for sale instead of single-family homes.
The financial advantages of condominium investing are threefold. Firstly, condos cost less than single-family homes. Even a condo of ample size will be less expensive than a small single-family home of comparable square footage. In fact, on average, condominiums are typically only ¾ the price of a single-family home. That’s because, when you are purchasing a condo, you are only paying for the actual dwelling. Alternatively, when you purchase a house, you are also purchasing the land that it occupies. Condo’s low input prices can set you up for an excellent return on a modest investment.
The second advantage derives from the first. Not only do you purchase the land it was built on when you invest in a single-family home; you also pay to insure it. Thus, insuring your condominium will cost far less than insuring a single family home. Taxes, too, are far lower when you are just purchasing a dwelling and not the land it was built on.
Finally, investing in Kailua Kona condos for sale means lower maintenance and repair costs. When you purchase a condominium, you are only responsible for maintaining the property’s interior. However, you will not be financially responsible for maintaining the exterior of the building. Siding, roofing, sidewalks, landscaping—all should be taken care of by the owners of the apartment complex. The same is true of larger plumbing and ventilation problems that are affecting the whole of the complex.
Investing in Kailua Kona condos for sale will cost you a whole lot less than investing in a single family home. However, that doesn’t mean you stand to face fewer returns. In fact, condominiums have several advantages over single-family homes as investments.
First, most condominiums offer convenient amenities and services. Many complexes offer pools, gyms, playrooms, and other valuable amenities. Renting a condominium thus means fewer additional expenses for families, as they can cancel their gym and pool memberships elsewhere.
Second, condominiums require almost no maintenance on behalf of the renter. Landscapers will mow the lawns and keep the greenery looking beautiful. Cleaners will be available to beautify communal spaces. Condos offer renters the ability to cut back on their personal housekeeping responsibilities, making them particularly attractive to busy parents.
Sure, investing in Kailua Kona condos for sale will cut down your typical land-lording expenses. But investing in condos also comes with a special set of expenses, namely monthly association dues. These dues may be enough to offset the advantage of a lower purchase price. You will have to factor the monthly association dues into your other monthly expenses to determine whether a given condominium, truly offers more earning potential than a single-family home of comparable size.
Furthermore, condominium prices typically drop rapidly and drastically in the event of a market collapse. That’s because many of those who purchase condominiums for non-investment purposes are first-time homebuyers. Faced with market collapse, these young families often have no choice but to accept foreclosure. Thus, in the wake of the 2008 collapse, condominiums in particular faced a serious decline in value. That being said, it can also be difficult to sell condominiums in a timely manner, as the number of FHA approved condominium mortgages has dropped markedly in the past decade.
Finally, condo associations will request one-time “assessments” in the event that their reserves begin to dwindle. This is most often the case when the association stands to cover major expenses or repairs. When this happens, associations will request an “assessment,” or a one-time payment from each unit’s owner. Depending on the scale of the association’s expenses, the value of the assessment can be far from negligible. Thus, it is best to inquire as to whether an association has outstanding assessments when you begin to consider a purchase.