Have you considered the idea of getting a luxury condominium because your next investment? Since condos are generally less expensive a single house, they can make accessible investments for the people with little cash or that are not used to property investing. However, they often obtain a bad rap on his or her investment potential.
As with the majority of things in tangible estate investing though, plenty of preparation and a focus to detail can enable anyone to earn profits. Here are some items to consider about condominiums as a possible investment.
Hard Math Trumps Dumb Luck
Exactly why people sometimes end up losing their shirt on the condominium investment, is practically always because they failed to understand the costs involved. Those not used to land-lording have a tendency to focus mainly on the rent they could charge, without giving full credence towards the costs they will also incur.
Aside from your mortgage costs, you’ll have property taxes, insurance, and potentially mortgage insurance, along with maintenance and repairs. In addition to that, you may also incur advertising costs for finding tenants, hips if the tenant has to be evicted, or expense of a home management company if this type of work does not appear to be to your liking.
If after subtracting most of these costs from your rent you suspect, determined by hard research, you could charge, you are always building a more appealing bang for your buck than you’ll buying an index fund, then it generally makes sense to purchase.
A good example
As an illustration, suppose you get a condo for $55,000 that you could pay cash for. Rent prices for the same condo are about $750 per month or $9,000 per year, giving you going back (before expenses) of 16.4%. Now let’s talk about expenses. Taxes, insurance, and maintenance and repairs on this kind of property will typically cost a little below $2,000.
If the property owner vacant, you will not only lose the $750 in rent you charge month after month, but probably get in a $250 advertising fee to identify a new tenant. Additionally, once Singapore marina one residences can have a negative exposure to a tenant or even an act of nature that could cost you from $1,000 to $5,000 in estate agent fees and/or repairs.
After subtracting these fees, your net rent is currently more detailed $5,500 a year, providing you of a 9% return on investment, that’s still fairly attractive.
Home Owner’s Associations
Another big expense that numerous folks don’t realize about buying condos is that there is typically a home owner’s association to which you will need to pay dues. Commonly referred to as simply an HOA, this organization is liable for the maintenance of common areas, like landscaping, parking areas or garages, improvements, and everything else that will modify the price of your investment.
While for some, an apartment could be an excessive amount of a risk, for that savvy investor, a condominium is usually a great way to get your feet wet in real estate investing.
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