Investing in condos and townhomes can be a great retirement strategy for those who know what they’re doing. Unlike investing in single-family homes, investing in condos and townhomes is totally different. And there’s no reason why you shouldn’t make a little profit from it.
In general, condos and townhomes appreciate at a much slower rate than single-family homes. Naturally, the benefits are seen in long-term strategies.
These strategies will help property owners to capitalize on the high-rising prices that are so common these days. So, if you’re someone who is interested in learning more about investing in condos and homes, you’ve come to the right place!
We’ve come up with a complete guide about investing in condos and townhomes that will surely help to get the ball rolling. And so, without further ado, let’s jump right into it!
Benefits of Investing in Condos and Townhomes
The benefits of investing in townhomes and condos depend entirely on what your endgame is. For instance, let’s say you’re buying either a condo or townhome to put it up for rent. Then you have a lot of benefits to look forward to!
Here are a few that will give you a better idea of what we’re talking about.
Getting straight to the point, the most popular benefit of investing in properties is the cash flow. Cashflow shows you the difference between your money coming in and going out. Essentially, it’s what you end up with after you’ve paid all your expenses. These expenses include property taxes, utilities, mortgages, and other miscellaneous expenditures.
For example, if the property you’re renting is bringing in $1,800 per month and your monthly expenses are around $900 per month, then the $900 difference shows that you have a positive cash flow going on.
Not only that, rents have always been high across countries. Take Myrtle Beach townhomes for sale as an example. This makes the prospect of renting condos and townhomes even more worth the investment.
Fortunately, the asking rent usually tips in favor of passive income investors.
The second most crucial benefit you can enjoy by renting out your condo or townhome is value appreciation. For example (and going back to our scenario above) real estate in Myrtle Beach is pretty much always in high demand, as people love idyllic townhomes and beach houses.
Appreciation is an amazing way to gain profit as a passive income investor. Over the lifespan of your property, your asset’s growth in value can really make a contribution to your bottom line.
However, that being said, there is no guarantee how fast or when your property will appreciate. Even though condos and townhomes tend to appreciate more often than you’d imagine, it’s still seen as the cherry on top as it is somewhat unexpected.
If the condo or townhome you invested in does appreciate, then as a rental property owner, you can expect a nice surprise coming your way!
If you don’t know what amortization means, it’s just a fancy way of saying that you’re going to pay back your loan over a prearranged period of time.
With that said, veteran rental property owners and most successful rental property owners aren’t paying the loan from their back pocket. If you play your cards right as a passive income investor, you’ll actually be able to pay the original loan using the rent you collect from your tenants.
Just consider the possibility of paying off your mortgage through your tenants. As a result, you’ll be able to benefit from the positive cash flow every month and build equity in a property without spending your own money. This is possible if you have invested wisely. Before you know it, you’ll be able to pay off your property in no time.
Unknown to many beginner investors, rental properties are a great tax shelter. This is because any rental property depreciation or phantom losses can actually decrease their tax obligations for seasoned investors!
Thanks to the rental property depreciation, the IRS will allow qualifying property owners, such as yourself, to write off a part of the cost of the asset every year for over 26 years.
The Beauty of Passive Income
As the term itself is self-explanatory, passive income is exactly that – passive. It allows you to just sit back and collect your rent without doing much at all.
That is if you have already established a solid foundation. And, along with the help of a third-party property manager, you literally won’t have to lift a finger or leave your house. Although third-party services come at a price, it’s totally worth it. With the property manager’s help, you can easily add more properties to your portfolio. It won’t add any extra workload to you at all!
One example of this is real estate investment trusts. You may invest in physical properties without actually building them. You can have a monthly cash flow and appreciation without managing the property. You’re earning without even breaking a sweat.
This is what REIT passive income is excellent at. You can invest in several commercial properties without worrying about how to run them. It’s also not dependent on the rise and fall of the stock market. So, the market’s volatility is not something you have to worry about.
Passive Income Portfolio
Unfortunately, not all of us have enough retirement savings to help us live comfortably once we retire. This is where having a passive income portfolio can be your best retirement vehicle.
It’s the passive nature of a property rental portfolio that makes it so great. After all, you deserve to live out your golden years comfortably and without any worries. A passive income portfolio will help that become a reality.
How to Start Investing in Condos and Townhomes
If you’re reading our article, then it’s clear that you’re interested in investing in condos and townhomes.
To get started, you first have to do your homework. That means, finding the property that you think is best for you, the one that meets all your expectations and ticks all the boxes. Next, you have to formulate a strategy and secure your financing.
Start by searching for the right property with the right numbers. Check to see the amenities they’re providing and the location before you make your offer. After you settle with an offer, it’s time to hire a third-party manager. They will help you to start a passive income portfolio.
Tips for Investing in Condos
Since you’re interested in investing in condos and townhomes, take a look at these three smart tips we’ve got for you.
1. Location is Everything
Since investing in condos and townhomes are long-term strategies, it helps to pay attention to the location you’re buying in.
Some believe that considering the location is not that important, but we’re here to tell you that it is. Seeing that most condos are almost always rented out, it makes sense to buy a condo in a promising area.
As a matter of fact, one can very easily argue that the area is more vital than the property itself. But, we recommend you do your own research before you settle to buy a condo or a townhome.
Talk to the local realtors and ask them what they think suitable prospects are. Also, it might be of great help to identify any future projects happening in the area as well.
Long-term planning of a city is included in their urban planning concepts and shared with their constituents. You may request this under the Freedom of Information Act, so you’ll know what the plans of the government are in a specific location. You may see that there are plans to improve the roads and add bridges or subways; in that case, it’s expected that the cost of properties surrounding that area will skyrocket, so it might be the best time to invest in that location because the foreseeable returns will be immense.
2. The HOA is Essential
These days, most condos and townhomes come with a homeowners association, aka HOA. Hence, it might be in your best interest to think about your investment decision with the local HOA in mind.
There are some HOAs that have strict rules and heavy fees, while others don’t exercise their power at all. However, always keep in mind that there are pros and cons to buying properties in HOAs.
In the end, it all comes down to you if they will play a part in your decision-making or not. So, think carefully and choose wisely with the local HOA in mind!
3. Amenities Can Be a Huge Selling Point
The whole idea behind being able to rent out a property successfully is to create a demand for it. Amenities come in handy that way. Having attractive amenities makes sure that your property doesn’t remain vacant and that you can easily ask for competitive rental prices.
Most condos and townhomes come with gyms, pools, parks, and other nifty amenities that renters find appealing. So, be sure to meet the existing level of demand for them.
In conclusion, we hope that our guide has helped you to understand the tricky part of investing in condos and townhomes. After all, it’s not easy being a property owner.
There are a lot of things you have to consider and think about when it comes to investments. And, it helps immensely if you’ve done your research and know all the tips and tricks.
Additionally, you would want your rental to be occupied all year round to maximize its potential. To do so, you need to make it appealing to many people. Take great photos, create nice captions and boost your post. When you do this, you’re creating a nice image of your condo for people who might have a use for them.
Ultimately, you would want this to sustain you for a longer period, right? So, maintaining your condo and townhome is also extremely important. Since you would be renting it out to strangers, naturally, they will be less careful in its use, and wear and tear are expected.
So regularly keeping it clean, up-to-date, and in excellent condition will guarantee its longevity.
Don’t forget to let us know how our guide helped you, and definitely share it with those who are thinking about getting into the investment game!