down your unit, so it’s best to move on. You should also ask to see how much money the HOA has on hand. If it’s low on cash and the building needs repairs, condo owners may be forced to pay a “special assess- ment” over and above their normal HOA fee. These are things you need to know before you buy. Typically it’s going to make more sense to flip a condo than hold one. They can work as holds sometimes, and what is almost always required for a hold is a low HOA fee. If the fee is relatively low compared to the rent, then it can possibly work. In addition, the building needs to be in decent shape and ran well and the HOA rules need to be reasonable. The answer to the question of whether condo investing makes sense is sometimes. It’s certainly less common for condos to make better investments than houses, but there are cases where condos work and can make for good investment opportunities. If you’re smart about the HOA board and fees, condos can be great investment opportunities that shouldn’t be overlooked. • WHEN ITMAKES SENSE TO HOLDACONDO

Does Investing in Condos EverMake Sense?

There are more risks with flipping condos, but that shouldn’t preclude you from capitalizing on a good deal.

sure there is still going to be a posi- tive cash flow after the HOA fee and other expenses are paid. Another thing you need to be wary of are the HOA bylaws. We once bought a condo in an HOA we intend- ed to rent only to later find the bylaws prohibited rentals. We were able to sell the condo for a small profit, (it sat on the market for a while and the HOA fee ate away most of the equity unfortunately) but if we’d only caught that before we purchased. It’s also worth noting that bylaws can change. When you buy a condo to hold, you will always be at the whim of the HOA board. Some HOA boards are good, others are lazy and a few seem to be run by boards with regulations so strict that it can make condo life miserable. In other words, don’t buy with a razor thin margin because things could change very quickly. The other thing to beware of is a poorly run HOA. If the building (not the unit) is in disrepair and/or there is a lot of vacancy, there’s really nothing you can do to fix this. The building’s condition will always drag

WORKINGWITHHOAS The worst part about holding con- dos is the HOA fee. Unfortunately, these fees often make it impossible for a property to cash flow. HOA fees can vary wildly depending on the complex. I’ve seen HOA fees as low as $100 per month to as high as more than $7000! (That was an odd property. Usually they won’t be more than $600 unless it’s a really nice unit or in a really expensive market.) If you are renting out a condo for $800 a month and have a $300 HOA fee on top of the mortgage and all the other expenses, it will usually kill whatever cash flow you would have had. While it’s true that the HOA usually pays for some things (exte- rior insurance, landscaping, some utilities, etc.), it still often prevents a property from cash flowing. That doesn’t mean condos will never work. You just need to run your numbers very carefully to make


by Andrew Syrios


nvesting in condos can be difficult, but there are ways to

and that can infringe on your profits. For example, if the HOA fee is $300 per month and the property takes six months to rehab and sell, you will have racked up $1800 in additional holding costs that will cut into your profits. Sometimes a property can sit on the market for quite a while, and in those cases, the HOA fee can really hurt you. The other problem is condos tend to be a bit less liquid than houses. This depends on the market you’re in. In Manhattan or San Francisco, there’s pretty much nothing but con- dos. In less dense areas like Kansas City, there’s usually a mix of houses and condos. One study from Zillow found that 83 percent of prospective

buyers wanted to buy a house, so when flipping a condo, you’re selling to a smaller market. Condos also tend to be hit worse in recessions than houses are. If a lot of condos in your building go on the market at the same time, this can flood the market and make it very difficult to sell your property without substantially lowering the price. WHEN ITMAKES SENSE TO FLIP CONDOS Those warnings aside, if you can get a great deal on a condo, then go right ahead. If you can buy a condo for $60,000, put $10,000 into and sell it for $100,000, why wouldn’t you?

make it work. Or more accurately, there are times when it can work. This goes for both flipping and hold- ing, although holding can be even more challenging. DEALINGWITHHOAFEES There’s no reason you can’t flip a condo in the same way you flip a house, but there are a few things to be wary about. The first is the HOA (Home Owner’s Association) fee. Each month you are rehabbing the property and each month it’s on the market will add up an extra holding cost to contend with,

Andrew Syrios is a real estate investor and blogger with Stewardship Properties. Learn more at or email

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