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I am interested in purchasing a condo property to lease out. What factors
should I look for?
Your best ally in selecting a good rental property would be the services of a
competent local real estate agent. Happily, we are affiliated with
Buy the Beach Realty, Inc., and can
arrange for you to work with their agents in selecting properties. Since we know
that we will be the ones having to deal with day-to-day management
issues, we would work to ensure that you do not make a purchase in a property
which, although superficially attractive, imposes burdens on operating your
condo as a rental. Prospective management clients are urged to email or call
before selecting an agent so that we help you by reviewing your needs with an
agent and making certain that he/she understands that we will have to manage the
property and what issues we expect will be addressed in selection.
As a general rule of thumb we have learned to avoid:
| Small condos with fewer than 100 units. Unless these are of the
"super-luxury" type commanding very high prices, they simply cannot afford to
have full-time staff and competent professional management. Small condo
projects are often run by boards comprised of owner-occupants who interact
with each other and exhibit indifference or hostility toward absentee
owner/investors who do not "participate" by donating personal services to help
run the property. |
| Condos with practices that place "hidden" restrictions on
leasing: Even if the condo rules permit leasing, many condo projects have
unreasonable rules which, in effect, penalize investors leasing out their
property. actual examples of such rules are:
| Requirement that a prospective tenant appear in person simply to obtain
an application form |
| Restrictions on re-leasing a unit within a given time period (usually a
year). This can hurt if a tenant moves out prematurely or is evicted and the
condo rules prohibit you from leasing it again within the year |
| Unreasonably lengthy "screening" procedures (I know of one condo in
which a a prospective tenant can be interviewed on only one day per
month...this could make it almost impossible to lease out your unit if the
timing of the one monthly screening interview does not work for the tenant's
schedule). |
| Racial bias in tenant screening and approval (we have run into several
condos which are pretty brazen in discrimination against prospective
tenants). This practice, aside from being illegal, can cost you lots of
money in lost time if a rental applicant is turned down for spurious
reasons. |
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| Condos with unresponsive management: Some are simply worse than
others when you are seeking repairs or assistance with leaks or other damage. |
| Condos which do not have separate metering for utilities: Many
condos in this town were built as rental properties back in the days when
energy was cheap and rentals were seasonal in nature. So some were built with
central electricity or air conditioning systems. You will sometimes encounter
this listed as a "benefit" in the maintenance when reviewing advertising
materials. Bear in mind that if your unit is empty, you are paying to provide
light and air conditioning for the unit owners who reside full-time on the
property. Moreover, tenants tend to underestimate the "value" of this feature
when shopping for a rental property. So you encounter artificially high
operating costs which in general the market does not offset with increased
rental value. |
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