Planning ahead for what types of tenant calls may come your way when renting out a condominium property.
I’m buying a condo with a great property management association, which should free me from a lot of the maintenance responsibilities of owning and renting out a single-family home. Is it true that the maintenance and repair of condos are easier to handle than other investment properties?
Assuming you’ve run the numbers and the condo provides a good return on investment or “cap rate,” you may have a good deal.
But there’s a lot more to buying and renting out a condo than assessing the management responsibilities for maintenance and repairs.
While a condo, particularly a detached property located in a newly developed cul-de-sac, may look like a low-maintenance opportunity for your money, you should take a careful look before investing.
Here are five extra things you’ll have to manage with a condo that you wouldn’t have to with a single family home:
- CC&Rs (condo bylaws). Condos are subject to rules and regulations called Covenants, Conditions, and Restrictions (CC&Rs). Be sure to understand these before making the decision to buy. Bylaws outline how the condo association operates and the rules and regulations that all owners and their tenants must adhere to. Some condo associations charge fees for parking too many cars out front, and may also have restrictions on the percentage of condos that can be occupied by renters. If you bought a condo with the intention of renting it out, it would be a disaster to learn that the maximum percentage of rented units allowed has already been reached. Find out before you buy a condo if such a problem may exist.
- Condo association versus owner responsibilities. If you thought the days of calling plumbers about leaks or scheduling furnace maintenance were long behind you, think again. Most condo associations only manage the common spaces, which for a detached condo typically covers landscaping, trash, and snow removal. Some exterior maintenance items such as rotted wood, old paint, and roofing repairs will also likely be covered. Knowing what the condo association actually handles can sometimes take more time to figure out than just having the problem fixed yourself. While you may have saved yourself time from calling the garbage service, expect to spend a lot more time talking to board members to find out what the association will or will not help you with.
- Condo fees. While you have removed the burden of calling a few companies for outside maintenance and paying them separate checks, you have added one new bill. While scheduling a regular payment is easy enough, be sure not to fall behind on your monthly fees. Condo associations often have strict penalties on late payments and are quick to charge interest.
- Condo association governance. Over time you may notice that the only condos that ever seem to get worked on are the ones belonging to the board members of the homeowners’ association (HOA). If you are going to have the association help pay for the cost of your exterior maintenance from the HOA’s coffers, you are likely going to have to engage the HOA and lobby it for approval.
- Condo’s “master policy” insurance. These policies can give owners a false sense of security, because they typically cover only exterior damage to your unit. Be sure to review your condo’s master policy to understand what is covered. If you are renting out your condo you will likely need to get additional property and liability coverage to make sure you are covered in case your tenant (or a guest) gets hurt anywhere on the premises, inside or outside your unit, and to protect you should any property damage occur within your unit. Ask your insurance broker to assess your condo and determine whether an HO-6 (condo insurance) policy is appropriate, based on what your condo association covers.
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