Choosing a Condo for Investment vs. Choosing a Home: 4 Things to Watch Out For

Choosing between a condo and a single-family home as an investment property can mean weighing a variety of differences between them and deciding which best fits your investment goals. Knowing the pros and cons of each property style, as well as what to watch out for, will help you get the financial results you’re looking for in your investment property.

Affordability Is Important

Considering the initial purchase price of both condos and single-family homes, a condo is usually the more economical option. Even if you purchase a smaller home, an equivalent condo unit offering the same number of bedrooms typically carries a lower price tag.

Making a smaller investment on purchase allows you more room in the budget to profit from rent payments and gives you more flexibility to compete in the marketplace for quality tenants. For first-time investment buyers, a condo is a more achievable purchase to begin your portfolio.

One major consideration with a condo purchase are the obligatory condo fees. These monthly fees range from one property to the next and include varying features and services. Watch out for high condo fees that may offset the savings from your purchase price and add too much to your monthly budget.

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Rubinstein Living Area

Consider How Much Maintenance You Want To Do

Depending on how much time and money you want to invest in your property, a single-family home can be a much different experience for both you and your tenants than a condo. In a home, as the owner you're responsible for all repairs, maintenance, and the related costs as they appear. You may be called in the middle of the night for a blocked toilet repair, or find costly problems in the roof or foundation of the home that can’t be left unaddressed.

In a condo building, many of these repairs and maintenance tasks are taken care of by a designated service provider. The costs for this service are likely included in your condo fees. This is another place where a condo is a benefit over a single-family home. On a monthly basis, you’ll know what you’re paying in fees rather than the unpredictable costs of home repairs, and you’ll rest easy knowing you won’t be getting the middle-of-the-night phone call from your tenant.

However, not all condo boards operate equally. Watch out for mismanaged properties showing excessive (or insufficient) spending, units and buildings falling into disrepair. Make sure to look into the property’s history of special assessments.

While condo investment can be a more stable investment for the long term, if the condo is mismanaged, you could find yourself with unexpected expenses.

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What Kind Of Lifestyle Are You Looking For?

One of the most common reasons for tenants to rent a single-family home over a condo is access to a yard. If your tenants have children, of course this is a deciding factor for them as they’ll want space to play outdoors. However, that isn’t to say a condo can’t also be a great solution for any type of tenant if the amenities are in place.

Location is an attractive feature in a condo. If the building is located near plenty of green space, a river valley, and loads of shopping options, this can appeal to a wide variety of tenants. If you’re seeking to attract families to your property, you’ll need to ensure there is access to schools, whether it is within the vicinity or accessible by transit.

Tenants may also be happy to sacrifice a backyard if your condo offers alternative options, such as private outdoor space like a balcony. If your condo also offers additional amenities such as a gym, pool, or other lifestyle features, this can also be attractive.

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Carrera Living Area

Investment Value Over Time

Depending on where your investment property is located, a single-family home and a condo will have very different appreciation trends. Of course, you want your property to provide the best return on investment possible, so you’ll need to do your research on how properties in the area have fared in the past.

Single-family homes tend to have a more aggressive appreciation rate. Due to the lack of mandatory monthly fees (like condo fees), buyers are more willing to increase their purchase price on a single-family home. However, a condo can also appreciate well if it’s in the right location and creating the right lifestyle to be in demand.

Watch for questionable value fluctuations in the neighbourhood. Your investment value should be as predictable as possible to ensure a return not only for today but for the long term as well.

While deliberating the differences between investing in a single-family home and a condo property, be sure to consider the possible pitfalls of each option. By investing with your eyes wide open, you can rest assured your decision is one that will yield the returns you’re looking for.

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