Basically, the concept involves ownership of an apartment in a building where the amenities are shared by all the various owners and where the cost of maintenance and management of the complex is shared by all. The legal description is divided co property. When looking for financial opportunities, buying a condo as an investment may prove to be an excellent opportunity is approached with circumspect.
There are several advantages to buying a unit with the purpose to rent it out. While the monthly income from rental may pay the mortgage, the property can appreciate and result in a nest egg when it is eventually sold. Property taxes and interest on the monthly payments are tax deductible. Also, maintenance problems are dealt with by the management of the property, an important consideration if you do not live close to your property.
It is important to consider the type of tenant that normally rent this type of apartment. They mostly consist of young career executives that do not have time for home making or maintenance. Retirees and divorced people also favour this option. They enjoy the joint amenities and security. Young couples and bachelors often view this as a temporary stage.
When purchasing a condo with the aim of renting it out, it is important to keep in mind the features that are on the minds of potential tenants. They want to be in close proximity to shops, transport routes and entertainment. They require excellent security and a well managed building, with convenient facilities such as swimming pools and laundry services.
Before making an offer, it is crucial to ascertain the exact contributions that would be required for monthly maintenance and the management of the facility. The general condition of the complex should be inspected and the status certificate of the building should be scrutinized. It may also be a good idea to conduct thorough research into the general area and to obtain information about the performance of real estate in general.
It is important to realize that an investment of this sort must provide a return of at least ten percent in order to be viable. It may be prudent to engage a lawyer or accountant to research the books and the legal structure of the complex. It is also necessary to be aware of the average rental in the building. Bad tenants can cause severe losses, and it may be worthwhile to appoint a rental agency.
There may be some drawbacks that need to be considered. Unforeseen maintenance or repair projects may cause sudden and unexpected expenditure and monthly contributions for maintenance and management services can increase without prior notice. High tenant turnover may result in losses and a general decline in the property market can cause a decline in the value of the investment.
With careful homework and the employment of professional advice, buying a condo as an investment can be a very profitable decision. However, every possible step should be taken to purchase in the correct location, and to ensure that your property is well managed. An added bonus is the positive effect that the ownership will have on your credit rating.
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