The American dream is to have two kids, a car and a house with a white picket fence. Condos don’t have white picket fences. Condos have never made an inroad as a substitution for a house in fulfilling the American dream. Let me count the ways that condos are not a good investment.

Reason 1
The target market for a condo is either recent college graduates that are single or elderly retirees that don’t want to maintain a lawn. The size of these two demographics as a percentage of the population guarantees that there will never be a high demand for condos. A condo fits the needs of a very small piece of the American population. The new graduates that purchase a condo always want to trade-up to a house in a few years after getting raises in their jobs. Once they trade-up to a house they will never desire to own another condo.

Reason 2
Condos are nothing more than a glorified apartment complex. Very few people want to spend 30 years of their lives living in an environment where there is somebody living above, below, to the right and to the left of you. Neighbors who play music too loud or who cook with lots of spices make the allure of owning a condo very unappealing.

Reason 3
Condos also have the negative of having a shared exercise room. If you want to work out you have to walk to this exercise room and possibly wait until somebody finishes in order to use the equipment. If you owned a house, you could walk to the next room and work out immediately. This is another drawback of owning a condo.

Reason 4
Condos have monthly association fees that you are required to pay. These fees cover the maintenance to the exterior of the building, the common areas and for maintenance. There is a board that oversees the condo association. This board can have the authority to dictate what colors you can possibly paint your unit or whether or not you can setup a Christmas tree or whether or not you can have a plant on your balcony. Many people find these restrictions coupled with the outrageous fee enough to discourage them from owning a condo.

Reason 5
Condos have traditional experienced a much lower price appreciation than houses. In market declines the price of condos decrease much more rapidly than houses. Nobody wants to invest six figures in a place to live only to find out the value of the property has not increased five years later. People would much rather invest in something that will appreciate and condos rarely fit this requirement.

When a person enters their home, they always say “Home, Sweet Home.” You will never hear somebody say “Condo, Sweet Condo.” Condos are not a good investment.

Filed under: Real Estate Investing

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