Pros and Cons of Investing in a Denver Condo
If you invest in real estate for long enough, you will undoubtedly hear plenty of differing opinions on what works well and what doesn’t. Surveying 10 real estate investors will yield half and half results as to whether or not investing in a Denver condo is a good idea. Ultimately, you are the only one who can determine what investment is right for you and it’s best to do your own homework. If you’re considering investing in a Denver townhouse or a Denver condo, take a look at the following pros and cons of doing so.
Pros of Investing in a Denver Condo
Price – It’s not prudent to make blanket statements regarding real estate, but generally speaking, townhouses and condos tend to be less expensive than single-family properties. Because of this, you are able to invest in markets that may have previously been out of your price range and condos offer the same low down payment financing options as a single-family property. Reduced price should not be the only reason for buying a condo, but it can help you stretch your buying dollars.
Decreased Demand – As previously mentioned, there is a segment of real estate investors who feel that condos just aren’t a good investment, and this is a great thing for people who do feel that they are a good investment. The reduced demand for condos makes it easier to buy new properties as they hit the market rather than battling with a dozen other investors over the same homes. Additionally, with a reduced demand, you are able to more selective about your purchase which increases your chances of finding a condo you love at a price that works for you.
Homeowners Associations (HOA) – The homeowners association can be viewed as both a pro and a con, but if you are looking to invest without the hassles of daily maintenance and upkeep, then it’s mostly a positive. Generally, condos have snow removal and grass cutting included in the monthly HOA fees, in addition to amenities like pools, tennis courts and parking. For first time buyers or elderly buyers who don’t want to deal with the stress of upkeep, condos and the HOA can be a great asset.
Property Management – There are often restrictions that make renting a condo difficult, so many investors do not look at condos as a possible rental option. However, if you can rent your condo, it is often much easier to rent out than a single-family unit, in part because of the perks of the HOA previously mentioned. Larger items, like roofs, may also fall under the umbrella of HOA responsibility. If you are able to rent a condo, you can do so and save money and time by not having to deal with upkeep yourself or hiring a property manager.
Cons of Investing in a Denver Condo
Resale Values – The best way to estimate the value of a property is to compare it to other options available on the market. Buyers use comparable sales and current listings as their guides for both single family homes and condos. The difference with condos is that buyers will be comparing condos within the same complex. If one condo sells for $250,000, it will be very difficult to ask $275,000 without having some significant upgrades and improvements. When it comes to resale value you are generally at the mercy of the complex and appreciation moves more slowly than on single family units.
HOA Restrictions – Above, it’s noted that the HOA can be viewed as both a pro and a con, and while it’s great that the association will take care of maintenance, it does come at a cost. The largest negative aspect of owning a condo is the restrictions that the HOA places on your property. It has been mentioned that it’s often difficult to rent your property due to restrictions, but there are other things that your HOA may control from the color you are allowed to paint your deck to whether or not you can have a decorative flag hanging from your garage. Even though you own the property, you may not be allowed to do everything you would like to because of the homeowners association.
Fees and Other Restrictions – Because of the stringent guidelines that many associations have in place, rehabbing a condo often must be done in stages. Prior to doing any work it is important that you understand all of the bylaws and that you seek approval from the property manager. If you are able to rent your condo, you need to crunch the numbers to make sure your net cash flow is going in the direction you want it to. Once HOA fees have been factored into your monthly payments, you may find that renting doesn’t justify the costs to own the condo. When renting a condo, you must walk a very fine line between paying high HOA fees while still seeing a positive cash flow on your rental.
When investing in condos, there are multiple factors at play that determine whether it is a worthwhile investment or not. Finding the right property with the right amenities can make investing in a Denver condo a tremendous success. However, there are several things to be careful of when investing in a Denver condo. Don’t let the negative experience of one or two investors keep your from investing in a condo, do your own research and decide whether or not a condo is a wise investment for you.