Why do condos make bad investment properties?


Well-Known Member *giggity*
Most people tell me to steer away from condos as investment vehicles. Is this generally true even when the property is purely used as a rental? What are the reasons? Is it because HOA fees take money out of your rent cash flow? Poor resale value?
I've always been told it's because a condo won't appreciate like a house.

HOA fees are a drag but part of that is offset by value in that they do fix some things you'd have to other take care of otherwise and they maintain the landscaping. What would it cost you to hire a landscaper to come in on a regular basis or do external maintenance (painting and such) on a house?

Poor resale value works both ways, as well, because it would cost you less to get into it in the first place.
My big concern with condos is the association. They have a tremendous amount of control over your property. Much more so than an HOA in a single family neighborhood. The maintenance fees are usually also way too high. All of my rentals require the tenant to take care of the yard and basic maintenance. It is very tough trying to make good returns on a piece of a building that is owned collectively by a bunch of others.

I will, however, flip a condo no problem.
Condo's are even more location sensitive than houses in my opinion, especially since your limited with what you can do to spice them up. Like a house, you can redo the exterior (think shingles vs. stucco), add a bathroom, garage, pool, deck, etc. Condo? repaint the walls, new appliances, mini-bar, if the HOA allows... But like a rj said above, they're good for a quick flip if you play it right.

Condo's in most American cities located downtown will usually hold there value okay. Though there was a big rough patch for a few years there but a lot of them have bounced back. The suburbs however, different story.