Are you considering buying a condo as a rental property? Explore why condominiums are often the preferred vehicle for first-time investors.
A condominium is a residence owned by an individual homeowner in a building or community where there are multiple similar units. Each condo is a strata lot and the owners of these strata lots make up the strata corporation.
The strata corporation is responsible for managing and maintaining the common property and assets of the strata development for the benefit of all of the owners.
A condo can make a great rental property for several reasons:
- Every single strata corporation in BC has a set of bylaws. These are in place to help protect your property. They will cover rules that you may not even think of to put in your rental agreement. For example: window coverings to be a neutral tone, no clothing or towels over the balcony railing, quiet hours are 10pm to 7am and so on.
- Because condo units are generally in close proximity, you almost always hear about what your tenants are up to…good and bad.
- Some condo complexes are wonderful little communities. If your tenants become a part of this community, they will remain living there long-term and you’ll have easy money every month.
- You don’t need to deal with exterior maintenance. This is the job of the strata corporation, as managed by a strata council.
- The cost of maintenance for things like roof repairs, exterior painting and grounds work is shared by all the owners. Therefore it is often a better deal and is paid for through your strata fees. Even things like plumbing problems are the responsibility of the strata as long as the issue is outside of your walls. You are only responsible to maintain the interior of your unit.
- The cost of insurance is less. The main insurance policy (fire, water damage, etc.) is held by the strata corporation and paid for through your strata fees. The insurance that the condo owner should have would be just to cover contents (eg. fridge, stove), improvements (eg. hardwood flooring if the original flooring was carpet/vinyl), rental income, and strata deductibles.
- You can get involved with the strata council in order to help make decisions for the good of the building. This gives you a say and keeps you involved in protecting your investment. As well, you have the advantage of being part of a team of people who care about the building and are working towards the same goal. Often an investor will buy multiple units in one strata complex so the time they spend on the strata council is worth it.
If you are serious about buying a condo as a rental property, you will need to make sure that rentals are permitted by the strata’s bylaws. If rentals are allowed, make sure there are no onerous rental restrictions such as age (a common one is 55+) or pet restrictions that may eliminate many of your potential renters.
As well, you must be sure to add the cost of the strata fees into your monthly expenses when calculating your cash flow.
Consider downloading the free Condo Buyer’s Due Diligence Questionnaire from our Rental Forms section so you can make sure you’re asking your realtor all the right questions.