If you are considering remodeling and renting out a condo, there are some things to mull over. Condo rentals can be a very lucrative investment for the investor. In most cases the condo repairs are handled by the condo association. While the investor takes on more monthly expenses by paying the monthly condo fee to cover these repairs, they avoid having to pay for major repairs themselves. This is a layer of comfort some investors enjoy.
Some condo rentals also offer their own trash removal, lawn care and other conveniences that renters enjoy. In some cases and some areas, it is easier to rent a condo than a home, so be sure to consider all the pros and cons of condo rentals.
Considerations for Condo Rentals
There are a few things an investor should consider when renting condos, or purchasing condominiums as an investment. Condo rentals are a good investment if the total cost of owning the condo is less than or the same as the amount of rent that will be collected. To figure out if a condo is a good investment, add the cost of your monthly mortgage to the condo fee and taxes (yearly tax bill divided by 12 months). Take that figure and subtract the amount of rent you can charge. The result is your profit, or loss on the condo rental.
Renting Out a Condo as a Landlord
Renting out a condo requires that you create a lease, place an ad for the rental in the classified section and show the condo to potential renters. Once you find someone who is willing to rent, they must sign the lease, and pay for first months and last months rent. The last month’s rent is usually considered a security deposit. There are laws in regards to how much you can charge for a security deposit, and they vary by state, so check your landlord tenant laws at your state’s government website to find out what they are. Usually the security deposit can be no more than one month’s rent.
What’s Involved in Renting Condos
If you are offering a condo rental, you have a few monthly duties. You will have to collect a monthly rent check, which should be mailed to your permanent address. As a landlord you are also responsible for handling necessary repairs that are not covered by the condo association (like appliances, or interior repairs). You must make repairs on anything that causes a health hazard or fix any problem that does not provide for a safe living environment including broken heaters, burst pipes that cause a lack of water in the condo, or flood the apartment, unstable decks, broken stairs and other potentially harmful problems.
Benefits of Renting Condos
For an investor, a condo rental is a good idea because in most cases major repairs are covered by the condo association dues which you pay every month. This may add another monthly expense, but it eliminates the possibility of having to pay $15,000 or more to repair or replace the roof every 10 years, or repairing or replacing expensive siding and footing the bill for other large expenses. This means you can create a more realistic budget of expenses each year, since you know up front what your costs are going to be. It also eliminates the possibility of being stuck with a large bill you can’t pay.