First Step to Real Estate With Limited Budget? Don’t Worry, I am Your Guide. You Can Start With Condominium.
Starting With Low Budget? Condo Is A Perfect Property For You Then!
Yeah, I understand. Many TV shows related to real estate investment show us fancy and luxurious properties that costs millions and millions of dollars. And then we start to doubt us like this ‘Will I be able to invest in real estate one day?’ But, real estate investment doesn’t necessarily to be a 7 figures projects. You can start small and make it bigger.
Even me, my first investment was a small condominium in College Park, MD. This condo has everything. Great location, great value, and great environment. Thinking about this property, I am still very proud of my husband and me for we decided to buy the condo. Now the condo is continuously generating monthly rental income, contributing our household economy allowing us to re-invest the rental income to other projects as well.
Significant Advantage of Condo Investment: Low Barrier
The greatest advantage of owning condo is, required budget for investment can be significantly lower than investing in houses. But there is extremely important factors you want to consider when purchasing condo. If you don’t consider these factors, your condo will have difficulty generating additional income, and even there could be potential loss of your invested money. Today, I will reveal my secrets of success.
Therefore, please just spend your 3 minutes to read this article, so you can avoid any mistake.
What is Condo?
Condominiums, often shortened to condos, are a type of housing where individual units within a larger structure are owned by private individuals. This means you own your own unit, similar to a single-family home, but you share ownership of the common areas of the building and land with the other condo owners. These common areas can include things like hallways, elevators, lobbies, landscaping, and amenities like pools, gyms, or community centers.
Here are some key characteristics of condos:
Ownership
You own your individual unit, but you do not own the land underneath it. You own a share of the common areas and amenities of the building or complex.
Structure
Condos can be found in a variety of structures, including high-rise buildings, low-rise buildings, and even townhome communities.
Maintenance
Condo owners are typically responsible for maintaining the interior of their units, while the condo association is responsible for maintaining the common areas and exterior of the building.
Amenities
Many condos offer amenities that would not be possible in a single-family home, such as pools, gyms, community centers, and security.
Costs
Condo fees, usually called HOA fee, are typically charged to cover the cost of maintaining the common areas and amenities. These fees can vary depending on the size and amenities of the complex.
5 Things to consider to make your condo investment succesful
1. Stores near the condo
You really don’t want to buy a condo standing out of nowhere. Condo is a concentrated houses in one building. It means, a condo building can carry people as much as a small village. In many cases, having no stores in walking distance near the condo implies the condo doesn’t have many demands and tenants. Remember, people live in condo for convenience and accessibility to downtown facilities such as grocery stores, convenience stores, restaurants, barber shops, and more. In investment purpose, buying a house in suburb is better than buying a condo providing an excellent privacy.
2. Purchase price and current rent price
Ensure rental income covers mortgage, condo fees, taxes, and maintenance, leaving a positive cash flow. You can calculate simply using the listed price of the condo and the monthly rental price. Use this formula [Monthly Rental ÷ Purchase price × 12].
This formula tells us annual potential profit rate of the condo. For example, let’s say a condo sale is listed for $180,000 and you found monthly rental is $2,000. Using the formula given above, [2,000 ÷ 180,000 × 12] = 13.3
It means, you will likely have 13.3% of profits per year by renting the condo out. Also, it means you will likely fully recover your invested money in 7 and half years, and you will be still owning the condo.
But, if the calculated result is less than 10, you should be careful for making purchase decision. Because, it means the price of condo is expensive but expected monthly rental income is too low. In this case, you can make more profit by purchasing other property.
3. Strong job market and population growth
Condo can be a very powerful tool for generating your wealth especially when it meets strong job market and population growth. Strong job market and growth of population ensure consistent demand for rentals or potential appreciation in value. When it happens, your rental income can rapidly increase by time. For example, you rent out your condo for $2,200/month this year but as the population grows, more demand is made and you can charge $2,800/month in the next year. Moreover, condo is relatively cheaper than renting an entire house, making easier to attract your tenants.
4. Accessibility to Public Transportation
It’s my tip. I believe condo must have reliable public transportations in walking distance. Public transportation widens potential tenants pool giving your potential tenants options to access downtown or core facilities in the city without their car. Having a reliable public transportation is one of the greatest advantages for people who just started their career, students, the elderly, and family members who need to commute without car.
Make sure if a bus is regularly operating, metro is reaching to the core facilities and downtown where a lot of jobs are.
5. HOA Fee
Too expensive HOA fee can be a heavy burden in a long-time. You want to remember that you still have to pay for HOA fee to condominium management to manage common area and maintain the function of facilities. Usually, the lesser amenities the lower HOA fee. For example, condos with pools has higher HOA fee than condos without pools. But be careful when weighing all the amenities and HOA fee. if you purchase a condo without any nice amenities, there will be less people who want to rent your condo.
Still Difficult?
It was nervous and difficult to me too, to start the first step of my condo investment. I understand your concern, and I can share my experience you need. If you are planning your first step in real estate investment, please contact me without hesitation. I am your realtor friend. You will find me from my contact information.
