Plan carefully for condo investment success
One of today’s most popular ways to invest is buying a condominium unit to rent out. A condo can give you a steady recurring income today as well as the potential to profit from rising real estate prices in years to come. So it seems like a safe and simple bet. In fact, however, it’s not difficult to lose money from a condo. The rental marketplace is crowded, and there are lots of factors to consider. So think carefully first.
Here are a few tips to help ensure your condo investment pays off:
Pick a winning unit
When you shop for an area to invest, the first thing to consider is the nearby supply of competing rental properties. If the area has few vacant condos or houses, you will probably find it easier to get a tenant. A condo unit on a high floor is desirable, especially if it has views of appealing green scenery and access to fresh air. In the center of town, it’s nice to find a unit with panoramic views of the skyline.
Bring a compass when you shop. You want to pay attention to which direction the unit faces. Some renters want a unit facing north since it may be less hot. Others want a south-facing unit for better flows of fresh air. A unit facing east will get sun and heat in the morning, cooling off in the afternoon. If the unit faces west, it will probably get hot in the afternoon and stay warm at least until sunset. Most tenants prefer to have a balcony, which can be used for drying clothes, growing plants and relaxing outdoors. The bigger the balcony, the more useful it is.
Convenience and access
Above all, it’s helpful to pick a location that offers ready access to facilities like shops and malls, education institutions, hospitals and parks, especially on major roads or sois that provide easy access. Mass transit is probably the most important facility of all for most renters, so stay close to sky train and subway stations and bus stops. “Close” means a walking distance of no more than 500 meters. Mass transit is what knits a neighborhood into the city, and renters who want an active urban lifestyle will insist on it.
Any large condo building needs good security. Video surveillance cameras should be installed throughout the building. Entry and exit should be controlled by key card. And it should have a proper fire escape.
The right rent
Pricing is extremely important if you want to attract and keep a tenant and earn a satisfactory income on your investment. First, check prices for similar properties in the same area and overall marketplace trends. Then figure out what price is appropriate for the specifics of your own unit--not so low that you sacrifice revenue unnecessarily, but not so high that you end up lacking a tenant for long periods of time.
If you’ve taken out a mortgage loan to buy the unit, it’s nice if you can price the rent to cover the cost of each monthly installment. Better yet, if you can get a higher rent, you’ll have money left over each month.
Home décor and furnishings
Don’t overlook the importance of decorating your condo well. If it's appealing and well equipped, it’s easier to find a tenant and you can justify charging a higher rent. Practicality is also important. For example, if the unit’s walls are painted rather than wallpapered, you’ll save on the cost of replacing the wallpaper in case of damage. Regarding furniture, moveable pieces are less expensive than built-in units and easier to move or replace.
Curtains are a key element that should not be overlooked. Get UV-protection drapes for greater comfort. There’s little need to spend a lot on decorative accessories. A few framed photos or prints and some small items like artificial flowers or ceramics may be all it takes to add some charm to a room.
Don’t overlook parking
It’s a selling point if your condo has parking space. No matter how close the building is to public transport, most condo dwellers like to have a car. Condo investors too often overlook this reality.
How fast will you break even on your condo investment? That’s hard to predict. But it’s important to analyze your investment time period and goal before you buy. That means assessing the risks and figuring out costs for maintenance and building management fees. These include the annual common service fee, security deposits for water and electricity meters, and more. You need to factor all relevant costs into your investment and pricing plan. Remember that you’ll risk a higher vacancy rate that will cost you income if the rent is too high. And remember the caveat when you buy any type of asset, including real estate: “All investments are subject to risk. Be sure to understand the terms and conditions before deciding to invest.”