What was the first real estate investment that you were ever introduced to?
For many of you, it was pre-construction condominiums. The premise is to buy before construction finishes and competition bids up the price.
Not a bad strategy, if you know what you’re doing. Like every other investment strategy available, many have been burned with condos because they didn’t get the right advice.
Tim Hong has successfully invested in condos for years, as well as many other real estate investing strategies. He’s helped many others, clients and partners alike, find success in real estate as well.
Tim’s our resident condo specialist. So here he is with an update on condo investing right now.
The state of condo real estate investing
So Covid seems to have hit the condo market a bit more, but things seem to be stabilizing now.
First off, the majority of short-term rentals (i.e. AirBnBs) got hit hard as everything was shut down. A lot of those investors decided to turn their short-term rentals into the long-term ones and that flooded the market with excess rental inventory.
We saw regular rental prices drop about $100-200 on average in most places back in April/May.
In July, condo listings on average were staying on the market for about 2 weeks prior to selling. Back in May, as a comparison, average days-on-market was pushing more than 3 weeks.
Similar to other types of homes, we saw a decrease of 50-60% number of units sold compared back in Mar, April and May 2019.
In June 2020 we saw things start to normalize, and so far July has seen a similar amount of units sold compared to July 2019. As for prices, although inventory was down in early spring, prices in July have seen an 8-12% average increase from July 2019 prices. Housing supply is still low, while demand is high, and we are still seeing multiple offers in some places.
As prices continue to push up, rental rates for condos don’t typically cover all expenses, including condo fees. Condo investing is more for those that want something with low maintenance, as you don’t have to deal with roof leaks, windows or flooded basements.
Condo markets have always brought the speculators with pre-construction, hoping for prices to rise prior to building completion. This strategy should be looked at more carefully as pandemics like covid could be in the back of everyone’s mind.
Short term rentals are still seeing a bit less demand, but as things open up, they will increase as well.
For long term rentals, we have seen some tenants ask for rebates as most condos have closed down their amenities and the tenants cannot use them. This will be a case-by-case basis if you want to work with the tenant for any discounts.
How do I learn more about the #1 real estate strategy right now?
Every month, we teach a free, basement suite conversion class. It’s called, “How a Beginner Can Start Building Wealth Through Real Estate.” Anyone is welcome to join. We show you the little secrets and quirks of finding, buying, renovating and refinancing duplex conversion projects, specifically.