Buying a condo as an investment

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People buy condos for many reasons, with some people wanting to secure a home for their family, some wanting a way to generate regular rental income, and others looking for long-term capital investment. Whether you want to rent out your condo, sell it on for a profit, or both, buying a condo as an investment is very different from buying one as an owner-occupier. While the factors you need to consider will often be the same, you need to create a target market in your mind and analyze every decision through the eyes of potential renters and buyers.  

Buying a condo to rent

As the condo lifestyle gets increasingly popular across North America, there's a growing opportunity for people to buy apartments and rent them out. Whether it's an inner-city unit in Brooklyn or a seaside apartment in Florida, young and old renters alike are attracted to the lifestyle advantages of condominiums.

There are lots of ways to leverage this popularity, especially if you're clever enough to buy an affordable condo in an upcoming neighbourhood where demand outstrips supply. While generating rental income to pay your mortgage is often seen as the easy alternative, there's a number of challenges that need to be overcome. First and foremost, you need to buy in a desirable location. An empty condo is no good to anyone, so take all the time you need to research specific neighbourhoods based on price brackets and demographics.

It's not enough to have a condo in a great part of town, you also need to have somewhere that's affordable for your target market. While amenities are important, you should always weigh up the number and type of amenities with the maintenance costs, projected rents, and income of your target market.  

Buying a condo to build equity

Whether you want to rent out your condo or live in it yourself, it's important to buy somewhere that has the potential to grow in value over time. Real estate outperforms every other asset class when it comes to reliable and long-term capital growth, with condos certainly no exception. While purchasing an apartment with the intention of selling it on for a profit can be challenging, it can also be incredibly rewarding. While equity builds naturally over time in most housing markets, there are lots of things you can do to give you an edge.

Analyzing market conditions should be a prerequisite to all property investment decisions. It's not enough to have a hunch or follow the advice of the agent, you should aim to have a detailed understanding of supply and demand trends and how they affect the situation on the ground. There are lots of ways to analyze specific markets, including current and historic growth rates, time on market trends, construction data, auction clearance rates, and housing supply numbers. While you need to develop a sound understanding of the basics, listening to expert forecasts and developing a relationship with specialist realtors can be worth its weight in gold.