Condominiums are a terrific investment opportunity in growing economies with strong demand. Actually, condominium investment is just another way to get your money out of the market, but it serves a specific function.
They may be very profitable as long-term buy-and-hold investments. Investors may get more than they bargained for when it comes to HOA costs; nevertheless, it is feasible to recoup the cost of the mortgage plus the HOA dues with the right kind of planning.
However, each person must evaluate their personal circumstances to see whether condominiums are a good fit. With this in mind, it’s crucial to determine your goals for the condo purchase before asking yourself if condominiums are a good investment.
Before anything else, let’s know first why it is good to invest in the real estate market.
Why is it good to consider real estate investments?
Putting money into a wide variety of assets, such as real estate investment trusts, mutual funds, commercial properties, or real estate holdings are essential in your investment portfolio. Lots of individuals don’t put money into real estate because they think it’s too hazardous or expensive but these two claims both fail as truth-tellers. In fact, there are several good reasons why real estate is a good investment. Real estate investing has several advantages, including substantial tax breaks and lucrative return rates.
But, due to the high stakes involved, more care must be taken when investing in real estate in order to maximize returns and minimize losses. If properly anticipated, the diverse nature and unique challenges of real estate may then provide good returns in the form of operational profit, equity growth, and capital growth for any investment opportunity, including condominiums.
What is a condominium?
A condominium is a privately owned building that, when coupled with others, functions as part of a larger business complex. Typically, the complex’s owner is the developer or a bigger business that also acts as the seller to individual buyers. Each and every portion contributes to a broader total, and in this case, the whole includes shared amenities like parks, pools, and pathways. One example of a residential real estate investment that sells condominiums in the Philippines is Asterra.
Like any other investment property, there are also risks and benefits to condo investing.
Condo Investing Benefits
Each condo investment’s returns are proportional to the effort put in by the investor before, during, and after the investment. As a result, condo investors may anticipate several benefits of condo investing:
Affordable investment properties
Condominiums are often more reasonably priced than residential properties like single-family houses, so if you’re just starting out, it’ll be helpful if you have a smaller capital. While the market determines the occasional exception, you should expect them to be cheaper on average. In the end, this facilitates the selling process.
Availability of exclusive amenities
You may take advantage of many great benefits of condo investing through its community features. Club rooms, swimming pools, and exercise facilities are common, and many renters will be attracted to your rental property if you provide these features. Also, buildings that provide desirable conveniences tend to attract many potential tenants.
A lot less upkeep is needed
The ease that comes with less upkeep is a major selling feature for condominiums. Owners may put all of their attention into their individual units without worrying about common areas like grass cutting or snow removal.
Real estate investing with steady cash flow
Most condominiums may be found in high-density regions, including city centers, university communities, and popular tourist spots. In most cases, real estate investors or condo owners may recoup most of their initial investment via increased rental income rates due to the property’s prime location. This passive income can help them in paying their monthly mortgage payments, making it a good investment opportunity for those seeking income.
Protecting your real estate values investment with condo rules
It’s common for condo owners to have extra regulations to obey. This, together with other regulations, helps in preserving property appreciation. Sometimes a set of rules and regulations is all that’s required to maintain a neat community that’s good for everyone who lives there.
Condominium Real Estate Investment Risks
Now that we know the benefits of condo investing, let’s check the general market risk of this type of real estate investments.
Restrictions of your personal freedom
There is usually a cap on the number of occupied condos in a community. These rules keep the neighborhood feeling cohesive and stop the property from being converted into apartments. Before purchasing a condo for rental purposes, you should confirm that you and any potential renters can meet all of the association’s standards.
Risk of poor property management
Lackadaisical upkeep of the common areas by the condo association may have a negative impact on the desirability of the whole complex, and hence, on the value of your individual unit.
As a property owner, you have faith in their word that they will keep the property looking nice and functioning as intended. Your long-term property value might be harmed if they don’t invest in critical renovations and keep the building and grounds well-maintained, and they could scare away good renters
Increasing condominium maintenance fees and/or other assessments
In most cases, condo rates increase every few years to reflect the rising expense of living. A pricey “special assessment” may also be imposed in addition to regular monthly dues.
In order to fund a one-time repair, like repaving the parking lot, property owners are required to pay an assessment. Condo or special assessment payments could become unaffordable if you fail to account for inflation while planning your budget.
Issues with disruptive neighbors
You’ll find neighbors in just about every community. There is a possibility of having neighbors right next door, as well as neighbors on both sides and above you. Tenant dissatisfaction is likely if the surrounding area is unpleasant.
As a property owner, you may also be expected to resolve disputes with nearby residents on your own. Unfortunately, not all landlords can be relied upon to be responsible and caring. This may lead to a greater vacancy rate and a higher rate of tenant turnover.
Condominium investing may be thought of in the same way as any other investment. You should evaluate your mental preparedness, available time and energy, and level of dedication, as well as the feasibility of implementing a certain investment plan in light of your unique circumstances and long-term objectives.
In case that you want to capitalize in the real estate sector, make sure to purchase an affordable yet modernized condominium unit like Asterra, that offers sustainable physical properties that caters the new normal lifestyle of the contemporary society.