Investing in Real Estate: Condos, Apartments, and Single Family

Investing in a condo, apartment, or single family home can have big potential, and can be a great way to plan for your future. As such, buying any property should be approached as any significant investment, requiring focus, diligence and careful research into local property, economic and demographic trends. Let's learn a little about what investing in these types of properties entails:

What are the differences between condos and single-family homes?
Using appreciation as a measure, condominiums in some areas have been as profitable an investment as single-family homes in the past five years. And in some markets, condos appreciated even more, according to some experts. While single-family homes have been the preferred investment by homebuyers, changing demographics are helping make condos more popular, especially among single homebuyers, empty nesters and first-time buyers in high-priced markets. Also, the condominium community has worked hard in the last few years to overcome image problems brought on by homeowners association and developer disputes as well as all too frequent construction-defect litigation.

Should I be looking into condos?
While condos never had the kind of appreciation experienced by single-family homes in the go-go 1980s, most ultimately have not lost value, say some experts. And with high prices in many urban markets and more single homebuyers in the market than ever before, the market for condos is strong. As with any home purchase, you should do your homework about the neighborhood or development before you buy. In the case of condominiums, it is important to read the past six months of homeowners association minutes to see how effective the board is and to learn about any possibly detracting issues (such as protracted litigation with the developer).

The condominium community has worked hard in the last few years to overcome image problems brought on by disputes and lawsuits. Associations are becoming more sophisticated about property management and taking steps to prevent legal problems and disputes. Condominiums have held their value as an investment despite economic downturns and problems with some associations. In fact, condos have appreciated more in the past few years than when they first came on the scene in the late 1970s and early 1980s, experts say.

While there are lots of reports about homeowner's association disputes and construction-defect problems, the industry has worked hard to turn its image around. Elected volunteers who serve on association boards are better trained at handling complex budget and legal issues, for example, while many boards go to great lengths to avoid the kind of protracted and expensive litigation that has hurt resale value in the past. Meanwhile, changing demographics are making condominiums more attractive investments for single homebuyers, empty nesters and first-time buyers in expensive markets.

How do homeowners associations work?
Learn everything you can about the homeowners association before you buy into a development governed by one. The association's financial, political and legal conditions are very important to your investment and quality of life. When run properly, homeowners associations maintain the common grounds and keep civility in the complex. If you follow the rules, the association should not intrude on your privacy or cost you too much in association dues.

Poorly managed associations can drag down property values and make living there difficult for residents. Start by studying the association?s covenants, codes and restrictions, or CC&Rs, and find out if you can live by them. For example, if the rules prohibit loud music after a certain hour and you like to play your CDs late at night, this may not be the place for you. Don't move in thinking you can get away with violating the rules or change them later because you may find yourself in turmoil with determined neighbors firmly in control of the association board.

Find out all you can about the association's finances. Beyond reviewing the budget, talk to the association treasurer and find out if dues are expected to increase and if any special assessments are planned. Ask if special inspections have revealed problems with roofs or plumbing that may cause a dues hike or special assessment later on. Call and meet with the association president. If you are the type of person who despises intrusions into your private life and the president seems more interested in gossip about the residents than maintaining the property, this may not be the right condo complex for you.

Speak with residents to get their views on the association's finances, its property manager, how it operates and any politics. Associations are volunteer organizations with elected boards, like a mini-government, so politics can enter the picture and spoil a good thing. Lastly, take some time to understand how homeowners associations are organized and how they conduct business. Like all real estate investments, the more you know the better off you are.

Is it difficult to project rents on rentals?
If you are buying a rental income property and applying for a loan to do so, the lender will require an area rent survey by a certified appraiser. The amount a landlord can expect to receive in monthly rent largely depends on what the property has rented for in the past, the condition of the building, its location and the current housing market. Lenders also look at other cash-flow considerations. They want to know if you have enough reserves on hand to cover predictable and unforeseen expenses, such as property insurance, taxes, regular maintenance and repairs.

Are vacation homes a good investment?

You can buy a vacation home today for investment purposes as well as enjoyment. And yes, there are tax benefits. Some people buy a vacation home to use as a permanent retirement home later, which allows them to get ahead on their payments. Another benefit is that the interest and property taxes on a vacation home are tax-deductible.

Some real estate experts predict that vacation homes will appreciate in value due to rising demand from the aging Baby Boom generation. You also can depreciate the property if you live in the house less than 14 days a year. You also need to consider whether you can afford to carry two mortgages, pay for the extra utilities and maintenance costs, and how this investment fits into your total personal finance picture.

Investors in any real property investment should have a specific strategy that includes the goals and manner for acquiring the property, holding the investment and disposing of the investment. This strategy is critical because every transaction is different and the market changes often. That being said, if you have an interest in purchasing a condo, apartment or a single family hom, it's best to have a professional Lake of the Ozarks real estate agent on your side to guide you through the process. If you're considering buying property at the Lake of the Ozarks, give the Fran Campbell Team a call today!

Contact the Fran Campbell Team to buy your next home!