Are condos a good or bad investment?
Answer:
Condos are the first step in the "American Dream". In high priced markets, such as California, where high real estate prices have priced out first time home buyers, sometimes a condo is the only way to home ownership.
Like when buying a single family home, location is very important. Since most condos are within communities, they have their own CC&Rs (Rules and Regulations) as well as a Homeowner Association that governs those CC&Rs. It is very important to study the Rules and Regulations before you buy a condo as well as study the Association's financials and minutes. Pay attention to the Reserve account when studying the financials.
Also in your case, buying in a new development, compare the builder's prices with comparable resale condos in the area. Check also with your city or county if there are feature condo developments being approved in the area. In a declining market that could mean that those newer developments will drop the value of the current ones or vise versa in a rising market.
depends on location and condition, but in general, it's better than renting, just not as good as a stand-along single-family home
bad you do do not get your moneys worth from them and where i live it is hard to resell them
Right now I would say bad. Condos are the last to go up in a good market and first to go down in a bad market. Plus you need to add in the association fees and the covenants of living there. Right Now My money is not on condos. Renting is king right now watch the market Crash all around you then pick up the deals.
Condos are harder to sell then a house. A condo does not have much value as a house does, and it takes longer to build equity on a condo then on a house.
If you are looking to investing into real-estate, a condo or duplex, are okay to start with. They are cheaper for payments when you are just getting in the business. But, buying and selling a home is were you will make more money.
My brother-in-law has been an investor of buying and selling homes for over 15 years. He also fixes up the house. He buys homes that have a good foundation and good location. It's not hard to "gut" out a home, if you know what you are doing. Places like Home Depot can help you out. The staff will give you step-by-step instructions to show you what to do.
I would say bad.. I have heard that condos are a very bad investment, but it also depends on the are and how many condos sell there.
Don't listen to this crap!
Buying a condo is just like buying anything else and a darn good investment in a LOT of markets. If resell traffic is high and values hold (do some research) there is NO reason you can't build good equity in a condo and that beats the heck out of renting.
Real estate itself is a good investment. Now is bad entry point though. A few months wait could mean 5 to 10% saving (or 5 to 10% extra profit when you sell).
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How to value a property during market downturn?
Housing market continues to slump. Now we can calculate true value of a property easily. As price decline, we don't need to guess and factor in the potential price appreciation while calculating home value. Without the guesswork, figures are more accurate.
Let's use following example:
Today, a typical 15 years old, two bedrooms condo/townhouse is priced around $500,000 and $550,000 in Sunnyvale, California. Rent for similar condo/townhouse is $2000/month.
If you are a home owner, $2,000/month in rent means $20,000 a year in profit ($24,000 per year in rent, minus $4,000 maintenance costs). A $20,000 income is equilevant of owning $400,000 bonds or CDs, because current yield of 30 Years U.S. treasuries are 5% (5% of $400,000 is $20,000). Bank CDs have similiar yields.
In our example, the two bedrooms condo/townhouse is 20% to 25% overpriced. They should be priced at $400,000.
It is interesting to note that if we redo the calculation from buyer's perspective instead of seller's perspective, the figures are even more shocking.
Mortgage payment consists of two parts: mortgage interests and mortgage principal. The interests portion is similar to rent. If you pay interest, it disappears and doesn't add equity to the property. To fully simulate characteristics of renting, we assume buyer will apply for a zero down, interest-only loan.
It turns out that rent of $2000/month is equivelant to mortgage payment of a $340,000 loan at 7.0% APR. And comparing $340,000 loan to $500,000 or $550,000 price tag, from buyer's view, the two bedrooms condo/townhouse is 30% to 35% overpriced.
One may ask, why is there a discrepancy between two perspectives of the buyer and owner?
The discrepancy is a result of 2% differences in interest rate that buyer borrow comparing to yields of bonds and CDs that owners would get. We understand that buyer would always pay more. That is the premium of buying to own. However, looking from home owner's perspective, current housing market is probably 20% to 25% overpriced. We recommand investors to wait for a better entry point.
http://money.cnn.com/2006/09/05/real_est.
http://money.cnn.com/2006/09/08/real_est.
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