Investment Properties: Is a House or a Condo a Better Option?
There are many decisions to make when deciding on the type of investment property to buy. What kind of tenants do you want to attract? How much time do you want to invest in regular maintenance and handling issues? What locations will be better suited to your ideal tenant but also convenient for you to manage?
Part of your internal debate may be whether to purchase a single-family home or a condo for your investment, but which option is better suited for you and your tenants?
Here are four important factors you should be thinking about that will help you make the right choice.
The property’s purchase price is a significant factor, of course, putting a condo at a significant advantage. Depending on the condo, the entry price is a lot lower than that of a single-family home, sometimes by as much as half. This makes buying a condo a much easier investment.
However, the additional costs for both types of properties vary, and this is where you’ll need to do your due diligence. A single-family home could require major repairs - unpredictable costs that are over and above the purchase price. You may encounter a water leak, foundation issues, or roof repairs, among other things.
While you may also encounter these repairs in a condo, the monthly condo fees you pay from the start typically cover these types of issues. This makes your investment more predictable and less risky.
Property taxes are another cost to consider. Taxes can be significantly higher in a single-family home, adding to the overall investment. As you’ll likely include these costs in your monthly rent amount, it’s important to consider if the required rent is too high for your ideal tenant.
Since your condo’s purchase price already starts in a more comfortable range, the added costs for a condo may be easier to cover in an agreeable rent amount for your tenants.
Look For Different Location Options
Depending on who your ideal tenant may be, condo properties tend to have better location options. As an example, if you’re looking to attract professionals to rent your property, a downtown condo puts them much closer to their workplace, giving them the gift of time in a reduced commute. As a bonus, being located near an active nightlife and the convenience of nearby restaurants, grocery stores, and public transit gives tenants the quality of life they’re seeking.
Condos are typically located near conveniences such as shopping and amenities, public transportation, or educational centres. A single-family home is usually located farther out from the downtown core, and tenants may need a vehicle to get to their daily destinations.
Less Time Spent on Maintenance Tasks
One of the biggest hurdles to investment property ownership is the thought of spending your own spare time doing maintenance tasks. Things like lawn mowing or snow removal, gutter cleaning, minor and/or major home repairs, inspections, and other such required tasks are your responsibility when you own a single-family home.
Generally, a condo property already has these services in place, usually covered by your condo fees, meaning your spare time belongs to you.
Imagine going skiing instead of shovelling in January’s frigid weather!
Ensure the Quality of the Property
Most condo properties have bylaws limiting the percentage of unit owners that can rent out their units to tenants. This means a condo building has a high owner-occupancy rate, and the pride of ownership will show through.
These bylaws also include rules to maintain a better quality of life for everyone within the building, meaning fewer neighbour-to-neighbour issues to resolve. With a single-family home, your tenants can be a risk whether they care for your property like it’s their own or act with complacency and let things go to disrepair.
While considering the type of property you prefer to invest in as a rental, reviewing every scenario that can affect your bottom line will help yield the right decision. Owning a condo as an investment property can bring you financial predictability, and therefore sustainability and growth, and it can also attract very different types of tenants than those of a single-family home. Ask yourself what sort of commitments you want to make to this property in terms of cost, maintenance, and ideal tenants, and you may find a condo is your best foot forward.