Let’s assume, as an investor, you have done your homework. You have found a great deal on a condo located in an area with a strong rental market, in a well maintained community run by a well funded association that has performed a Reserve Study, is well insured, has a low delinquency rate, and has not required any Special Assessments. Here are some reasons that it may make a profitable and low maintenance investment.
1. Condos Are Easy to Manage
Home Owners Associations (HOAs) have Rules & Regulations addressing prohibited activities, parking restrictions, removal of holiday décor, etc.. All of which are enforced by the HOA. Plus, you won’t get those midnight calls when the water main or sewer line breaks. While you may get the call from your tenant about a roof leak, you would typically be able to refer that to the HOA for repair.
2. Condos Are Easy to Maintain
There is very little to maintain when you own a condo. Typically, the grounds and all exterior features including walls, roofs, landscaping, paving and parking structures are all maintained by the HOA. If your complex has a boiler or solar system, then the hot water and heating systems may also be maintained by the HOA.
3. HOA Fees are Considered an Expense
Capital expenditures, that would normally need to amortized for tax purposes, can be immediately deducted as an expense. This would include new roofs, new paving, new fencing, or any other improvements paid for with your HOA dues.
4. There is Potential for Increased Depreciation Deduction
Depending on how the complex is laid out, condos have the potential for a higher Improvements ratio. This higher ratio could increase your depreciation basis and therefore, increase your depreciation deduction.
5. HOA Fees Force you to Save for Capital Expenditures
We all know we are supposed to be saving for Capital Expenditures on our investment properties, but that can be easier said than done. By paying your monthly HOA dues, you are forced to save. When the unexpected new roof, for example, is needed, you will not be caught off guard. The HOA with the healthy Reserve Fund you have chosen, will have you covered.
About Colleen K. Cotter - mySanDiegoAgent Realty Group
The mySanDiegoAgent Realty Group provides professional real estate consultation in the areas of residential, income properties, luxury rentals, short sales, first time home Buyers, real estate for senior citizens, real estate issues related to divorce, military and corporate relocation. We are experts in downtown San Diego and coastal properties especially Coronado, Encinitas and Point Loma, downtown lofts and condos, urban planning and sports team seasonal placements.
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