Why Condos Are Not Good Investments

QUESTION: I have about $50,000 to invest in real estate and am considering buying several foreclosed condos at bargain prices. The lender will offer excellent financing with only 5% down payments, so I can buy several of these foreclosed condos.

What do you think of condos as investments? If you don’t like condos, what do you recommend for long-term real estate investment profits?

ANSWER: I do not recommend condos as investments. They can be wonderful personal residences (my mom enjoys hers very much), but never buy a condo with any profit dreams.

Although there are a few exceptions, most condos are not good investments. The primary reasons are they are usually in oversupply, the buyer demand is very limited and expenses are usually higher than the rent you can obtain.

A better alternative would be fixer-upper houses which you can buy at below market value, fix up, and then either sell for immediate profit or hold for long-term investment.

When I buy fixer houses, my goal is to raise the market value at least $2 for each $1 spent on improvements. By adding valuable improvements you can force the market value up regardless what is happening to your local home sale market.

A One-Year Listing Is Far Too Long

Q: We own rural land that we want to sell. But the realty agent we talked with insists on a one-year listing. Don’t you think that is too long?

A: Yes. The only situation in which a one-year listing should be signed occurs if the agent writes in that listing that you can cancel it anytime without reason. The better agents gladly put such a condition in their listings because they have confidence in their ability and they know it is good for business.