Condos, or condominium properties, are properties in apartment buildings that are usually available for independent sale, which is what makes condominium investing a great option for a real estate investor as investing in condos is cheaper than investing in single family homes. Additionally, investing in a condo can generate steady rental income and can provide you with a source of consistent cash flow.
Is buying a condo to rent different than buying any other type of investment property? Not by much. The steps to buying a condo to rent out are quite similar to buying other forms of investment property – and we’ve broken the process down for you.
7 Easy Steps to Buying a Condo to Rent:
Step #1: Do some research
This is the most vital step when buying a condo for investment.
You should research the real estate market as a whole. Look out for the most recent trends and data for the nationwide market as well as the state and city you’re considering to buy a condo in. Moreover, check out whether laws and regulations in your area are changing in 2020. For example, if you want to rent out your condo real estate property on Airbnb, is that even legal? What about rent control laws? Be sure to cover all these aspects in your research.
Step #2: Sort out your finances
While some condo investors may have the entire amount ready to pay for a property, others don’t. If the latter applies to you, you’d be taking out a mortgage from a lender (usually a bank). Moreover, as with other types of real estate investments, you should be prepared to put in around 20% as a down payment for the investment property. And then pay your mortgage in monthly installments, as you plan with your lender. And while it may be more difficult to get a loan for a condo, the property itself is cheaper than say, a single family home.
After you’ve sorted out your condo investment property financing, you need to calculate your real estate expenses. This will help you in your search for a condo which will generate positive cash flow at the end of the month. But more on that later in this blog…
Step #3: What’s your rental strategy? Make a decision
Do you want to rent out a condo investment property on Airbnb or traditionally?
You should decide on this before anything else. It will determine where you search for property, the type of metrics you should consider, and financing methods. For example, if you are buying a vacation condo, you should be searching for condos in more central areas, close to downtown and tourist attractions. Additionally, you will have to analyze metrics such as expected rental income and occupancy rate differently than those for traditional properties. A good Airbnb occupancy rate is not the same as a good traditional occupancy rate, for instance. For traditional properties, generally, you’d need to look for condos in good locations, not necessarily central, but close to amenities and in good school districts.
Step #4: Where do I begin to look when buying a condo to rent? Find a location
That’s a good question. After all, location is (almost) everything in real estate. After you’ve decided on a rental strategy, it’s time to search for a location. Are you considering buying a condo in-state or out of state? If you’re a beginner real estate investor, maybe begin by investing in the same state you reside in, and as you develop your portfolio, consider out of state real estate investments.
Once you’ve settled on a city or state, you need to conduct real estate market analysis. Use Mashvisor’s real estate search engine to find the most profitable neighborhood. The real estate heatmap specifically is the best tool for the job.
Related: The 15 Best Places to Buy a Condo for Investment in the US
Step #5: Find and analyze condos for sale
After you’ve chosen a location, check out our property finder to find condos to rent in that location.
Once you find a promising condo rental property for sale, it’s time to perform investment property analysis. You can simply use our condo investment property calculator to access information on cash on cash (CoC) return, cap rate, expected rental income, occupancy rate, among other important real estate metrics and data.
Start looking for and analyzing the best condos for sale near you.
Your analysis should also give you an idea of how much cash flow you should be expecting at the end of every month. That is – expected rental income minus all monthly expenses. If your cash flow isn’t positive, maybe the condo isn’t worth it. So if you’re wondering how to know if buying a condo to rent is a good investment, the answer is three words: positive cash flow.
Step #6: Negotiate a buying price
Asking price is almost always different than the selling price in real estate when buying a condo to rent. That is to say – there’s always room for negotiation in the real estate industry.
Related: 10 Best Real Estate Negotiation Tips for Buyers
Step #7: You’ve bought the condo, now what? Rent it out
What should you do after buying a condo to rent? Is it too obvious if the answer is “rent it out”?
To do so, you’ve got to do some marketing for the condo. For short term rental properties, it may be a bit easier because the platform is already there. Just add your listing, attach some good quality photos, and write a thorough description of the rental property, and you’re halfway there. To appear on the first few pages, you need to have good reviews and a good score as a host. So spend your first few months perfecting your score and gain good reviews to rank higher.
As for traditional rental condos, you can market the property through a real estate agent, your real estate network, word of mouth, rental listing sites, and social media.
Get Started Buying a Condo to Rent Out
Condos are a great way to make money in real estate. They are a more affordable option than single family homes, and there’s potential to generate income through them. And while a condo as investment property can be a challenging endeavor, if you follow the 7 above steps, you should confidently know how to buy a condo to rent. Get started now.