Condos – Are they Good Rental Property Investments?

Condos can be a profitable, affordable, and low-hassle option if you want to invest in real estate.  But they carry a unique set of costs and risks that you should understand before buying.  They include HOA fees, condo association rules and restrictions, and special assessments that may be charged to cover condo association expenses.   

I have been investing in rental properties for over a decade and have owned single-family dwellings, townhomes, and condos.  Condos can be a great way to get into rental property investing and, if done right, can be very profitable.  

This article discusses the pros and cons of condo investing to help you decide whether it’s right for you.

This post may contain affiliate links. If you click on a link and complete a transaction, I may make a small commission at no extra cost to you. 

The information contained in this post is for informational purposes only. It is not a recommendation to buy or invest, and it is not financial, investment, legal, or tax advice. You should seek the advice of a qualified professional before making any investment or other decisions relating to the topics covered by this article.

What is a Condo?

A condo is like an apartment (and many used to be), but you own the individual unit.  I own garden-style condos that are only three or four levels high, but there are condos in cities that are in high-rises.  

It is worth noting that although you own the unit inside the condo building, you do not own the underlying land or the exterior of the building. 

Why are Condos Good Investments?

Condos Are Affordable

Condos tend to be less expensive than townhouses and single-family homes.  This makes it much easier for a beginning investor to save the down payment to buy a condo.  You can also grow your rental property portfolio faster by buying condos.

Now I recognize that even with the lower price point, getting that down payment can be a challenge.   

If you need help getting that down payment in place, I have a ton of great tips of how to set up the right account, jump start your savings (with basically no effort) and keep the savings rolling with passive income streams that actually work and don’t require any money or knowledge to set up.  

Check out my article on how to get started investing in condos for all of that and more.

Condos Can Cash Flow

A condo’s affordability leads directly to its ability to cash flow better.

Cash flow is money remaining from your rental payment after all expenses are paid.  Positive cash flow is one of the hallmarks of a good rental property.  In my area, condos are usually the only type of rental that cash flows. 

This is because other types of property are more expensive and do not generate enough rent to cover the high mortgage payments and other costs.   

This might not be the case in your neighborhood. But because condos are often cheaper than other types of dwellings, they should, on average, have an easier time cash-flowing.

Rents for Condos Are Easy to Determine

Before you purchase a rental property, you should be sure that it will cash flow.  Perhaps the most important part of that calculation is the expected rent.  

Condos have a unique advantage over other properties when it comes to predicting expected rent because their market rents are so easy to figure out.   

Here’s why. In most renters’ eyes, a one-bedroom condo in a community is no different than another one-bedroom condo in that same community. That’s because they often have identical floorplans and match down to the exact square footage.  

This means that you can charge the same rent that others are charging and be confident that it’s on point. 

And it’s easy to find out what others are charging.  Go to Zillow’s “Rent” tab and run a search of the condo’s ZIP code.  The results will often include rental listings for your type of unit in that condo community.  

You should also ask your real estate agent to pull recent rental comps (this shows what comparable units in that community rented for).

Of course, if you want a ready-made solution to this, you can simply use Mashvisor. They are a fantastic resource specifically designed to help real estate investors and are an industry leader. They include rental comps as part of their service. 

You can use promo code AFF15 for a 7-day free trial of Mashvisor in addition to a 15% discount forever on subscriptions to any Mashvisor plan.  Click below to take advantage of this offer


Any of these methods (or all of them in combination) can give you a very accurate idea of your expected rent for the condo.  

You Can Easily Adjust Your Rent to Market Changes

The ability to easily and confidently determine market rent at any time allows you to keep pace with changes in the rental market.  In other words, you can capture rent increases when they happen and reduce your rents to remain competitive if market rents decline.  

Additional Tip:  You can also raise rents at renewal time with less fuss because tenants have access to Zillow too. You can point them to the other listings and show them that the increase is market-driven. 

Condos Appreciate in Value

Condos, like other forms of real estate, tend to appreciate over time.  But a common criticism is that they appreciate less than single-family homes.  While that may have been generally been true in the past, a Washington Post article in 2017 seems to show a reversing of that dynamic.   

Regardless of overall trends, the value of a specific property is going to be governed by supply and demand and a lot of it will depend on the condition of the local market and the desirability of the particular condo.  

If a condo is in a hot location and the lifestyle afforded by that condo is coveted by buyers in that area, it will skyrocket in price.  If it’s poorly located, poorly managed, or its owner-occupancy rate is below 50% (we go into this later), the value of that condo could flatline or even decline.

Condos Have Great Amenities and a Sense of Community

Condos come with a host of amenities that single-family homes do not offer.  Typical amenities include a pool, clubhouse, and gym, and some communities can offer basketball and tennis courts, cash wash areas, and other desirable features.  

Condos can also offer residents a greater sense of community and many condo associations throw events to enhance the community experience.  This tends to attract high-quality tenants and encourages them to stay. 

Condos Need Less Maintenance

Condo owners generally do not need to worry about exterior property maintenance and repairs.  If expensive items like the roof or siding need to be replaced, the condo association typically takes care of that.  The same holds for landscaping, snow and trash removal, and maintenance of common areas.  

You typically just need to worry about maintaining appliances and systems within the four walls of your unit.  That makes owning a condo much less of a hassle than a townhouse or single-family home. 

As a bonus, I have found that the insurance policies for condos tend to be cheaper than policies for townhouses or single-family homes because no roof or exterior coverage is needed.   

Benefits Shared With Other Rental Property Types

I have focused on benefits that are unique to condos vs. other dwelling types, but condos also have additional benefits that are shared across housing types. 

They include tax breaks, better returns through leverage, and the fact that your mortgage is being paid down by your tenants. 

If you want to learn more about these (and other) benefits of rental property investing, check out my article on this topic.

Drawbacks of Condo Investing

The biggest drawbacks of investing in condos include HOA fees, special assessments, condo association rules that may limit rental activity, condo association mismanagement, and possible difficulty selling when compared to larger properties. 

Condos Have HOA Fees

Remember earlier when we discussed how you don’t need to worry about exterior maintenance? Well, that comes with a cost. Each condo owner must pay homeowners association fees (HOA fees) to the condo association to cover the cost of maintaining exteriors, common areas, and the community in general.  

These fees also are used to build reserves against large expenses associated with replacing roofs, siding, parking lots, pools, and other amenities offered by the community.   

The condo association may also require owners to pay special assessments if the association needs to pay for a large expenditure.  In an ideal situation, the condo should have been reserving for such large expenses, but that does not always happen.  

You should carefully examine the condo documents before you buy to figure out if their reserves are adequate.  

Condos Have Association Rules

As mentioned above, you should carefully read the condo association documents, including the covenants, conditions, and restrictions (CCRs for short).  Watch out for any limitations on renting out your unit.  Some associations allow you to rent the unit but impose lease requirements that you may not like.  

While the condo association rules can work in your favor by preventing unwanted behavior by your tenants and other residents, they can also cut against you.  

Bottom line – carefully read the CCRs to understand what you are signing up for and whether they conflict with your investment goals.

Condo Associations May Be Mismanaged

The condo association has a governing body that often consists of volunteer board members who are residents.  As with any collection of individuals, you run the risk of incompetence or worse, which could lead to mismanagement of the condo association’s funds.  

While you can’t fully protect against this risk, you should examine the condo documents and financials before buying to see if there are any red flags.  

You may also want to talk with residents about how the condo association is managed.

Condos May Be Harder to Sell

If you are buying a smaller condo (1 bedroom, for example), you may have a harder time selling that condo because it will not appeal to larger families or groups. But the trade-off is that you may have an easier time renting that property out because there always seems to be tenant demand for nice, low-priced living spaces.

If you are worried about this issue, ask your real estate agent to pull sales comps (these show historical sales prices for relevant condo units in your community). Look at the “Days on Market” (DOM) for those comps. The longer the DOM and the more price reductions you see on a listing, the more difficulty that seller probably had in selling it.

Owner-Occupancy Considerations

Before buying a condo you should ask about the “owner-occupancy rate.”  This is a rate that shows how many of the condos are occupied by owners vs. renters.  I always pay attention to this rate before I buy.  

As you can imagine, I prefer condos with a high owner-occupancy rate because owners generally have stronger incentives to maintain the quality of their community.  This leads to a more desirable living community, which in turn leads to higher rents and rising property values. 

If the owner-occupancy rate is below 50%, you may have problems financing the condo, so you should learn the owner-occupancy rate as soon as possible.


If you are looking for strong cash flow and a lower price point to start investing, condos may be for you. They can be attractive to renters, which helps with vacancies.  And the lower maintenance requirements can ease the burden of managing the property. 

There are risks with condo investing, but through proper due diligence (including a careful review of the condo association documents) and smart planning, you should be able to manage those risks.

If you’d like to avoid some of these risks but are intrigued by real estate investment, consider online crowdfunding, which is a maintenance-free option that some consider to be a safer investment.  

I like Fundrise and invest with them personally. They have really low minimum investment requirements. As of the date of this article, their starter package only requires a $10 investment.

If you join them via this link, you can be part of their “refer a friend” program where you (and I) can receive $50 worth of bonus shares for signing up. If you want to help support the blog and also get some free shares, it’s something you may want to consider.

This post may contain affiliate links.  If you click on a link and complete a transaction, I may make a small commission at no extra cost to you.