For years my dad has invested in lands and has been able to sell them when their values rise. Now an opportunity to invest in condominium units is knocking on his door. Aside from being an agent for the condos, my dad wants to invest in at least one or two units and turn them into rental units in the future. The prices are lower now since the company is still pre-selling the units. Do you think investing in condo units is a wise move? What are your ideas on this?
It depends on if he has experience as a landlord or not. This could be the opportunity he needs, but at the same time if he has no experience dealing with tenants or renters, it could turn nasty. On top of that, while the profits are pretty steady and (somewhat) guaranteed, the maintenance expenses can put a serious dent in his finances. He'll probably need a property manager and a good handy man as well. A handy man is generally easy to get - just build or buy a small house somewhere on the lot and make that part of his benefits. A small shop with general tools he'll need and you've got any honest man tied down to a dream job.
Personally, I've never been keen on purpose-built apartments and condos - whilst they can be a good short-term rental investment, I've always found structural problems to occur much earlier than with older, traditional homes. I prefer subdivided houses which can be reverted to a single dwelling if needs be.
A serious issue, also it depends on what are the agreements when you buy the condo. It is attached to other units. So if an earthquake happens and the condo units have to be repaired, who decides which contractor they will use. Possibly you might spend a lot more then you bargained for, and you possibly might be forced to use a contractor you do not want to use. A lot depends on the reputation of the company that constructed the condos, what happened with other units they constructed in other subdivisions. Who pays for repairs, what are the association dues.
Well just need to calculate a realistic return on investment, taking into account taxes, future (probably) rise in interest rates, possible repairs further down the road etc. And then see if that income/risk situation is worth it, especially considering that there can be quite a bit of work involved in being a landlord. And just for fun, as I've said a million times here, take a look at REITs. Gives you the rental income with absolutely no work and gives you a much more diversified investment where a single problem doesn't cost you the income of 6 months or more.
Basing on your replies I'm thinking investing in condo units is not really a good idea. We used to be on the business of renting out apartment rooms before but the whole property belongs to us so there's not much of a problem other than taxes and some maintenance. My other concern is the fact that if he buys a unit, then he only buys the unit itself. The lot where it stands still belongs to the company who owns the buildings.
I have never seen the use in buying a condo for any reason. To me, they are large apartment units with a different name. Everything you know about the financial end of buying, selling and renting real estate kind of flies out the window when you start dealing with condos.
The problem with condos is that you can only do so much with them when it comes to remodeling. In many areas you are only limited to the inside because of community rules against changing up the outside. If the community is not invested in keeping up the curb appeal, it could bring the value of your home down.
Overe here, condos are getting to be popular as an investment. But I see it only as a hype. My nephew who resides in Hongkong bought a condo here located in the high end area of the city. He planned to use that when he retires. Now he needs money so he was renting it out. And it took him 10 months to finally get a tenant for his condo. So I'd say it's not a good investment when you intend to rent it out.
It's such a good thing we decided not to push through with our plans of investing in condominium units. After much deliberation, we decided to cancel our plans and just stick with the land investments. We don't really have much experience when it comes to condo investments and I think we're not yet ready to take the risk either.
