Are Condos a Good Investment for 2021?

Is buying a condo a good investment for 2021? This is a question on the minds of many real estate investors as 2020 draws to an end.

As you may already know, condos (or condominiums) are multiple individual units housed in one complex or building. Unlike apartment buildings that are owned by one entity, condo units are individually owned. Condo owners share common facilities such as pools, gyms, and grounds, for which they are required to pay a monthly maintenance fee.

To answer the question “Are condos a good investment for next year?”, we need to look at some of the pros and cons. We also need to consider some recent condo market trends as they have been impacted by COVID-19. Let’s get into it.

4 Reasons Why Condos Will Make Good Investments in 2021

Here is why condos are a good investment in the US housing market 2021:

Reduced prices

A recent Redfin report revealed that year over year condo sales dropped 53.5% in May and 31.3% in June 2020. Before coronavirus broke out, the price for condominiums had hit a 3-year high in January with a 9.7% year over year increase. However, the sale price of condos has been falling steadily since March. With the pandemic being far from over, condo prices are not likely to increase significantly in the near future. As a result, you are likely to get a good deal if you invest in a condo in 2021.

Appreciation

One of the main questions that potential real estate investors ask is ‘Do condos appreciate in value?’ Not only are condos cash flow properties, but they generally appreciate in value over time. Even though COVID-19 is driving prices down right now, once the nation is past this crisis, condos are likely to continue back on their path of historical appreciation and price growth.

However, the rate of appreciation of property boils down to location. A good location is characterized by the following factors:

High population growth
High median income
Availability of amenities such as restaurants, shops, parks, schools, and hospitals
Low crime rate
Accessibility to public transportation
Walkability

If you find a condo in the right location, you can almost be guaranteed that your property (whether it’s a traditional or Airbnb investment property) will appreciate in value.

No external repairs and maintenance required

When you buy a multi family home or single family home, it’s your responsibility to repair and maintain outdoor areas such as the roofing, siding, gutters, pathways, and patios. This is not only expensive but time-consuming. As a condo owner, you don’t have to worry about shoveling snow, trimming hedges, cleaning gutters, or painting your investment property. Once you’ve paid the monthly condo fees, the homeowners’ association takes care of all the exterior maintenance.

Availability of amenities

Condos for sale come with shared facilities like swimming pools, jogging trails, tennis courts, golf courses, and gyms. This could make it easier for you to attract traditional or Airbnb tenants to your rental property. Since your tenants can enjoy all these amenities without leaving the property, they are likely to stay even longer.

Ready to start your search for a money-making condo? Begin here.

Related: Is Investing in Condos Worth It?

4 Reasons Why Condos May Not Be a Great Investment for 2021

On the other hand, here are some reasons why investing in a condo might not be a very good idea in 2021:

Difficulty in obtaining financing

Condo mortgage requirements are usually stricter compared to those for a traditional home loan. For example, some lenders will only approve a loan if a certain number of units are owner-occupied. Others have requirements about how the HOA budget is spent. In addition, mortgage rates on condos are usually higher compared to what you would pay for a single family property on similar terms. This is because condo loans are considered riskier. As a result, getting financing for a condo can be very frustrating and time-consuming.

Restrictive homeowner association rules

One con of investing in condos in 2021 is restrictive HOA rules.

Every condo development is controlled by a set of rules and regulations. This is usually contained in a document referred to as the Covenants, Conditions, and Restrictions (CC&Rs). The regulations are enforced by a homeowners’ association or a condo association. While such rules can be useful for maintaining a cohesive and clean atmosphere in the neighborhood, they can also be too restrictive. For instance, you might not be allowed to make any renovations or modifications to your condo investment property. Therefore, take time to peruse the CC&Rs before making a purchasing decision. If you are not happy with the rules, then a condo might not be the right investment for you.

High condo fees

As mentioned earlier, condos are individually-owned properties that share common amenities. Property owners are required to pay a monthly fee for emergency and routine maintenance including snow removal, landscaping, trash collection, security, concierge, property management, roofing repairs, and painting. The amount paid will depend on the size of the property and the amenities covered. These were the average condo fees in some US cities in 2019:

Chicago – $397
New York – $813
Houston – $426
Philadelphia – $334
Los Angeles – $690

Can you pay the fees being charged and still make a good return on investment? Think about this before investing in a condo in 2021.

Changing tenant requirements

The pandemic has greatly changed what many people are looking for in a residence. Since people are spending less time at school or the office and more time at home, renters want more privacy and space. Due to concerns about the virus spread, renters are also not very keen on sharing amenities like gyms, community pools, and elevators which usually come with condo living. Therefore, if you choose to invest in a condo in 2021, attracting tenants could be a great challenge if COVID-19 remains an issue next year.

Conclusion

Are condos a good investment for 2021? The truth is that there is no one-size-fits-all answer to this question. There are many factors you need to consider to determine if a condo investment is right for you.

So consider the factors listed above to decide if buying a condo to rent is the right investment strategy for you. Keep an eye on market news and visit real estate investing websites in order to keep up with the latest trends and developments in the US housing market.

If you’ve decided that buying a condo is right for you, find a cash flowing one today.

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