Why I Don't Invest in Condominiums: Lessons Learned from Real Estate Investing

As someone who has been deeply involved in real estate investment in the United States since 2007, I've had my fair share of experiences in both the highs and lows of the market. Throughout these years, I've come to learn valuable lessons, especially when it comes to investing in condominiums. While condos may appear to be an appealing investment option at first glance, my experiences have led me to be wary of them. Here's why.

Lack of Control Over Neighbors and HOA Fees:

Condominium living puts you in close quarters with your neighbors, but you can't select who they are. This can cause problems if you have noisy or negligent neighbors. Furthermore, you have no control over whether your neighbors pay their HOA (Homeowners Association) dues. When some residents fail to pay, it strains the HOA's finances and may result in extra assessments for all residents.Special assessments are additional fees assessed on top of regular HOA dues to cover unexpected expenses such as repairs or maintenance. These assessments can be especially burdensome if the apartment includes high-end amenities such as gyms, elevators, or swimming pools. A unexpected demand for a big sum of money might take residents off guard and have far-reaching consequences for the community.

Vulnerability to Market Fluctuations: 

In 2008, we saw a large wave of foreclosures across the country. Condos, with their high density and shared ownership structures, were especially vulnerable to the consequences. Even if you invest in a brand-new building, foreclosures and distressed sales in the same complex might have a major impact on its value. Furthermore, any flaws with the structure or maintenance of the building can have an influence on the value of your property.For example, we purchased an apartment in an apparently sturdy brick structure only to discover significant water leaks. Thousands of dollars were ultimately spent by each homeowner on the required repairs, such as tuckpointing, whether or not their flat was impacted by the leaks. These unforeseen expenses can be very taxing for investors.

Unpredictable Maintenance Costs:

Owning a condo entails joint maintenance and repair obligations for communal amenities. Sadly, not every condo organization does a good job of handling these obligations. Ongoing issues with facilities such as HVAC systems or elevators might strain the association's budget and raise dues for all homeowners. Even while individual unit owners may not always be able to control these growing expenses, they have a direct effect on how affordable and desirable the property is. Furthermore, because of persistent worries about the HOA's financial stability, it may be challenging to sell the unit or obtain financing.

So, while condominiums might offer certain conveniences and amenities, the lack of control over neighbors, unpredictable expenses, and vulnerability to market fluctuations make them a less attractive investment option in my eyes. Real estate investment should ideally provide stable returns and long-term growth, but the inherent risks associated with condos make them less appealing compared to other strategies. For investors, it's crucial to weigh these factors carefully and choose investment avenues that align with their risk tolerance and financial goals.