Is it Worth It? The Pros and Cons of Investing in Condos in Connecticut
In the realm of real estate investments, many investors are well-acquainted with traditional assets such as single-family homes, multifamily residences, and commercial properties. However, amidst these familiar options, one asset type often overlooked yet capable of delivering promising returns is condominiums. When it comes to Property Management in CT, condominiums present an under-appreciated opportunity for investors seeking quality returns.
Surprisingly, many investors remain unaware of the benefits of condo investment. In Connecticut alone, there are approximately 165,000 condos, many of which were constructed between 1970 and 1990, making them an attractive and practical choice for those wishing to enter the real estate market.
Condos by the numbers in Connecticut:
Like any investment, there are pros and cons of investing in condos in Connecticut. We always encourage clients to get familiar with the pros and cons before making any decisions. After analyzing the pros and cons it’s a good time to cross check those pros and cons to your goals. The pros and cons can be gathered, peer reviewed and researched. Your goals are your goals, and this is the opportunity to see if there is alignment.
One of the best reasons to consider a condo as an investment property is the cost and ability to own a rental property. We hear too often from people that don’t own real estate yet that they can’t find a deal they can afford. Condos may give you an opportunity to get in the game if you’re one of those people!
Pros
Low Barrier of Entry
One of the primary benefits of investing in condos in Connecticut is the low barrier to entry in terms of cost. Condos are more reasonably priced for investors who may not have the funds to invest in more costly types of real estate. Unbundled Property Management actively manages properties for several investors that have purchased condos in the range of $150k to $200k, which translates to a $37-50k down payment if putting 25% down.
Amenities
Another advantage is that several condominiums include built-in features such as swimming pools, sports courts, playgrounds, and communal gathering places. These amenities can increase the appeal of your property to tenants, helping you to attract and retain reliable renters.
Shared Capital Expenses
Investing in a condominium comes with shared responsibility for the property's capital expenses such as parking lot maintenance, roofing, siding, and landscaping. Large renovation or replacement costs are usually financed over a period of time, which can help simplify cash flow management. This means that you won't have to pay a significant amount of money all at once when major repairs or replacements are needed.
However, some people may see this as a disadvantage because they have limited control over when these projects are completed and at what cost. Nonetheless, it's worth noting that many associations that manage these properties make decisions that benefit the entire community. Therefore, it's possible to have a positive experience owning a condo and being part of a community that makes sound decisions for the common good.
HOA Benefits
In some condos, the HOA fees cover the cost of heating and water, making your property more appealing and simpler to rent since tenants won't have to worry about paying for these services themselves.
Cons
Limited Control over HOA
There are potential drawbacks to investing in condos as well. The most significant disadvantage is the potential for expensive HOA fees, which owners are responsible for paying. These fees are used to cover things like maintenance of common facilities and infrastructure. If the costs are excessive, it may be difficult to turn a profit, as your rental income may be reduced.
When you invest in a condo, you don't have complete control over the property. Although you may be able to vote on fees, you have limited control over how the money is used, as the HOA sets the fee. This may be a disadvantage for investors who prefer more control over their investment.
We manage several condos throughout Connecticut and as we mentioned above, we find that most associations operate in a positive way, keeping all owners and residents interest in mind when making decisions on capital expenses and monthly HOA fees. While this is something you need to consider and research before buying a condo we don’t think this is something investors should avoid condos for.
Rental Restrictions
All condos will have rules and regulations along with bylaws. It’s very important that you review these rules in great detail to understand the restrictions or rules with renting within the complex. Some associations don’t allow rentals at all and some have specific restrictions. We have not seen any condos in Connecticut allow short term rentals, so if Airbnb or short-term renting is your niche, condos probably aren’t for you.
Limited Value-Add and No Expansion Opportunities
When it comes to footprint and expansion, what you see is what you get with a condo. You may have an opportunity to open a wall up in the kitchen area or finish a basement, but you won’t be able to add square footage or expand with an addition. If your vision is to add additional space or do large renovations for big value add returns, condos may not be for you.
Additional things to consider
Further understanding of the financial records
Studying a condo association's financial records is important if you want to invest with confidence. If there are any warning signs, such as a lack of cash reserves or an excessive number of litigations, the property may not be a wise investment.
When purchasing a condo in Connecticut the seller must provide you with a resale package. You will have 5 days to review the resale package and you have the right to back out of the contract for any reason if you don’t like any of the information within the resale package.
Additional Research
Investing in condos requires additional research because condo values respond differently than single-family and multifamily properties. When investing in a condo in Connecticut, consider the historical data that will support your plan.
Investing in condos in Connecticut can be a good way to generate quality returns. However, it's important to weigh the pros and cons of this type of investment, do proper research, and make an informed decision about whether it is right for you. Happy Investing!
