Real Estate is a volatile market and is subject to extreme fluctuations. Recent few years have seen a downfall in buying trend of typical homes. But a whole new picture is evolving and gaining traction and that is called ‘Condominium.
Investing right in condos can bring splendid returns. However, there are a number of factors influencing the ROI like the locality of your investment and the mood of the real estate market. That being said, condos are great for newbies investors looking for their first investment.
What makes Condos a great investment for you?
Look at all the positive factors; you will be buying a brand new condo, chances of it being in bad condition is slim to none so no extra expenses on repairs. You are not responsible for the maintenance or caretaking as you pay a fee and everything is taken care of.
As more development is taking place, rural areas are being urbanized. This transformation has inflated the demand for condos by ten folds. The more condos in the urban area, the more people come running to buy it. Millennials love staying near the crowd, market or in the downtown areas, it leads to more demand for condos.
Another factor is rent. A lot of people migrate to different cities for jobs or studies. This causes them to look for affordable yet small places to live in. In fact, it is the most preferred type of accommodation preferred in today’s world. They come with a number of cool amenities like gymnasium, pool and a lot more based on the type of condo you buy.
What favors condo the most is high demand. As the demand for condos is high, the prices are high too which will continue to rise with the demand. This situation makes an easy selling getaway. The high demand will cause your condo on sale to get sold faster than usual.
If you compare a single-family home with the condo, you’ll find having a condo is not just beneficial for investment purpose, it is also cheaper than single-family homes. Now, you’ll be investing less and gaining more profit.
Advantages of investing in Condominium
Due to its lower prices, its an eye turner for the investors seeking better returns and with a condo, managing it gets easy. Moreover, when selling, it gets you a premium resell price compared to other types.
Imagine you have bought a single family home for 30 lacs. You did not put enough thoughts before buying it. This house type appreciates slower hence the return you seek will take way longer too. Even renting out such a place is tougher than condos. Even if you wanted to sell your house as fast as you want, it still would take time to find the right buyer or you can end up underpaid. Dreadful it may seem, the case is different and is rather pleased with the condominium. You can sell it quicker or get it rented and earn a passive monthly income. Renting a condo is easier than home due to the low maintenance cost. People come running to live in a rented condo.
A lot of people who buy a condo the very first time are intimidated by the maintenance cost and make a bad decision for going for single-family homes. It doesn’t work in the long run.
With a thoughtful and thorough calculation, condo actually turns out to be the better alternative. Imagine clearing the water clogging, removing the garbage, doing the landscaping, maintaining roof and pool, and making necessary regular repairs to the outside, all these by yourself. A nightmare and definitely an extra burden on your pockets. But with condominium, you only pay the cost of upkeeping and the maintenance is taken care of.
Talk About the Return on Investment
Debaters can get in line and read this systematically. Why condo is better from the investing prospect? Check this out.
A condo you are planning to buy costs 10 lacs.
The most common rent rate around your area is 12000 per month. You spend 10000 per year for the maintenance that covers all the repairs and everything, 10000 a year for the taxes, 2000 for insurance, other expense 1200 per month and Housing association fee 2000 a month.
Total earnings from rent = 144000 and total expense 60400. That closes the net earnings from a condo in a year 83600. More than 8% of return annually.
A single family home that you planned to buy cost 15 lacs.
Let us assume the rent is almost the same 12000. Now count the expenses, property tax 15000 years, insurance 5000 a year, double the maintenance expense as you alone are responsible to 20000, removing garbage 300 per month, 1000 for the landscaping per month and other expenses 1200 per month.
Total Earnings from rent = 144000 and total expense 70000. You get a net profit of 74000. Its a difference of 9600 but it still matters.
We just made an assumption, there are a lot of factors for the costs incurred like the locality, average rate in the vicinity. But you calculate anyway, the condo will reap more profits in any scenario.