Property Investing Warnings for Condominiums

by Chris
(Escondido, CA)

Condominiums, especially low-priced ones can seem to be a great income property investment. However, there are a number of property investing warnings and pitfalls that can (and WILL) quickly eat up any "positive" cash flow.

For starters, when you own a condominium, you are at the mercy of any / all other owners in the same building. How? Simply put, the fact that their units are directly attached to yours makes your property and their property physically the SAME property.

And guess what, they aren't the LEAST bit interested in the health of your rental business, hence the "deadbeat partner".

But you might ask how such attachment can become a problem. Well, suppose one of the neighbors has a problem breeding cockroaches; it's only a matter of time before your tenant gets infested with their filth. And should the health department get involved, they will cite you and force you to hire an expensive extermination service to the tune of $60 to $200 a month!

But since the neighbors refuse to do anything about their dirty problem, not only will the extermination service become a perpetual expense, but there is a better than average chance that you will lose a good tenant. And good luck trying to rent a roach infested condo to the next tenant.

But that's not all. Suppose the upstairs neighbor has a water leak that conveniently finds its way into your unit. Well, they aren't too concerned because it's not THEIR place that's getting wet; they're staying nice and dry above the moisture as it's all draining into YOUR unit.

If you try to get the HOA involved, they will most likely tell you to inform the owner so that they might take corrective action. keyword:"might". HOAs generally keep a distance when faced with such issues, but they are quick to fine or take other action when your tenant violates one of their rules. Thus, you are also at the mercy of the HOA company.

So when they tell you to pack sand, what then? Not much you can do since it is illegal to enter your neighbor's unit to do repairs. And besides, who in their right mind would pay to repair someone ELSE'S property?

Worse yet, if the above owner is a slumlord, chances are they won't do anything about the leak. And when the health inspectors finally appear on the scene (and believe me sooner or later they WILL appear), you'll be facing a hefty citation for having an unfit property.

There are many other potential pitfalls, but these are the more likely/important ones. I could go on indefinitely, but I think I've shared enough.

Not to discourage any prospective condominium landlords, but I just thought a heads-up would be in line. I own SEVERAL condominiums, and thought I've seen it all, but there are always new surprises around every corner.

Chris