On Condos

We’ve looked at condos many times over the last 15 years. There are problems with condos as an investment property in Las Vegas. These problems include:

• The tenant pool condos attract typically only stay two years. These are transient people with no children to lock them to a location. The result is frequent turn cost and vacancies. In comparison, our average tenant stay is 5 years.
• Condos typically have high HOAs. This makes it difficult to get a reasonable rate of return.
• Condos compete head-on with apartments for tenants. The competition from apartments keeps condo rents low. After all, would you rather rent a 20-year-old condo or would you prefer a new apartment with multiple pools, a theater, an exercise room, free WiFi, etc.
• Financing limitations - While residential financing is available for most condos, I do not believe investment financing is available unless certain criteria is met (such as 51% or higher owner occupants). For investors, most likely you would have to pay cash.
• Condos take a relatively long time to rent or sell. See the two charts below. The chart on the left shows the median days on market for single-family resales, which is about 12 days. The chart on the right shows median days on market for condos, which is about 42 days. Condos take longer to sell or rent even in this crazy market.

• Condo maintenance issues - With condos every plumbing issue becomes a major problem. If your unit is upstairs and you have a leak, it damages the unit below costing you a lot more for repairs. If your unit is downstairs and the unit above leaks, it damages your unit and you have to make the upstairs owner pay for the repairs, which is NOT always easy. Sometimes it’s difficult to get hold of the upstairs tenant for days or even weeks. Meanwhile, the problem in your unit gets worse.
• Close proximity of neighbors - When the neighbors cause problems, your tenant will complain about the noise, cigarette smoke seeping through their unit, etc. There’s nothing you can do about the neighbor issues, and one bad neighbor in a condo will have your good tenants wanting to leave instead of renewing a lease.
• Maintenance cost - There is a belief that condos have lower maintenance cost than single family. In Las Vegas, this is not true. Las Vegas is in the Mojave Desert and only certain types of construction materials survive. See the image below. Las Vegas single family homes have low maintenance costs; much lower than the condo association fee.