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is a condo a good investment

The Summary: A lot of our readers and students buy or consider buying condominiums as investment properties. Purchasing a condo as an investment comes with its own unique set of considerations. The first consideration isn’t unique to condos and is at the core of what we believe makes a good investment: cashflow. The rest are unique to condos and should be considered every time you are planning to purchase a condo as a rental.


Once upon a time in a burgeoning City, there was a bachelor doctor who saw a beautiful condo.

It had the view of the Space Needle. The condo was stunning, and it was new. It would be a great investment, he had to have it. 

Meanwhile, the city was growing at an incredible pace. There were new tech start-ups entering the area. Property prices were climbing year after year. 

So when another condo in the same building became available, this one as a studio, he thought to himself, why not buy it as well? How could I lose with properties appreciating so fast? 

What I didn’t tell you was that this doctor already owned another sweet two-bedroom condo with a view of the ocean. He could see the sunsets from the window. There was a new park that just went in with an ocean walk just a few blocks away. This one was in a prime area in the City.

And that, my friends, is the story of how a doctor came to own three high-priced, class A condos in downtown Seattle just before the crash of 2008. He went into the crash with over $20,000 a month to pay in mortgages.

Clearly he made mistakes and he learned a lot. Sadly, he would have been able to avoid these if he knew what makes a good investment and if he had understood that buying condos as investments comes with several unique considerations that you need to take into account before you purchase. 

In this article we’ll cover these considerations and also share what happened to those condos and to that doctor through the 2008 crash! 


Consideration #1: Cashflow

If you’ve been following our blog or taken our real estate Course, then you’ll know that we believe cashflow is the foundation of what makes a good investment. 

If a property doesn’t cashflow, then it’s a liability because it takes money out of your pocket each month. What you want to do is collect assets or in other words, properties that put money in your pocket. 

Our hero unfortunately bought liabilities. These Class A condos didn’t bring in enough in rents to cover expenses. Our hero of the story had to cover the losses out of pocket, month to month, even when they were fully rented as he waited on the properties to appreciate. 

This is usually the case for Class A properties, not just condos. They often operate at negative cashflow because of their inflated prices. Despite the negative cashflow, people purchase them anyway as investments because they’re banking on appreciation.

This was tolerable for our hero while they were rented. But when the market crashed in 2008 and due to some other unfortunate circumstances that resulted in them not being rented, it became a major problem.

Now, that doesn’t mean you can’t find condos that cashflow. 

If you purchase it right, according to sound criteria and you are diligent about using a cash-on-cash calculator to evaluate your purchases every single time, you can certainly find condos that cashflow. 

This is the same as if you’re buying any other investment property. Be sure to always buy for cashflow!


Consideration #2: HOA dues

One of the reasons our hero’s condos didn’t cashflow was the homeowner association (HOA) dues. 

Most condos, and even some homes, come with HOA dues. These are the dues that you as the owner pay to the condo association to upkeep any shared land, shared roof or walls, shared common areas, and amenities.

For that two-bedroom overlooking the ocean, the HOA fees were over $700 a month alone. With rent being only $2,300 a month after the market crash of 2008, HOA dues alone ate up a major chunk of the income. 

Plus, his HOA fees tended to increase year after year, which put him further in the red each year. 

This is one of the most important considerations to keep in mind when purchasing a condo. When you factor in the HOA dues (we do that in the utilities/monthly expenses column of our cash-on-cash calculator), you should consider taking into account these increases year over year. 

This isn’t to say that you should avoid properties with HOA dues. We’ve had properties with HOA dues that resulted in greater appreciation because the HOA maintained the neighborhoods extremely well.


Consideration #3: Condo rules and regulations

Besides HOA dues, the other really, really, really important thing (yes, it’s this important) to adequately research are the condo rules and regulations.

These rules and regulations can be extremely restrictive. For example, you might want to make improvements to your property only to find out that the condo rules prohibit such improvements. 

You might also find out that any improvement, no matter how small requires an extensive application process and HOA approval. 

Another example of a restrictive rule that will impact your investment greatly are rules governing your ability to rent your condo. 

In our hero’s case, there was a rental cap in the building where he purchased two units. Only 20% of the units in the building could be rented at any one time. So in a 150 unit building, only 30 units could be used as rentals. Unfortunately, that meant he couldn’t rent both his units. So both of them were going to sit empty, potentially for years before he could rent them again.

The moral of the story is, you MUST understand the nuances of the HOA’s stance on rentals before your purchase. Understand if you are going to be able to use the condo as a long-term or short-term rental. 

Also, know that things can change over time. You don’t necessarily have control over them because you own just one part of the building, and don’t have decision-making control.

Some condo rules are actually great because they force the owners (and sometimes your renters) to maintain certain standards and keep the neighborhood from deteriorating. This ultimately helps ensure your property maintains or gains in value. 

For example, when we went to replace the roof of one of our properties, the HOA required a much more expensive roof to maintain the “look” of the neighborhood. Our renters were also fined repeatedly by our HOA for not putting away their garbage cans after trash day. 

The condo association also upkeeps the property, so you as the owner have a lot less to worry about and do. You don’t have to worry about security or landscaping, for example. 

There are both upsides and downsides. The key is just going in with eyes wide open.


Consideration #4: Capital calls

We’ve already talked about the possibility of HOA dues going up over time. But what if something random happens that affects the whole building? Is it possible for the HOA to require each owner to come out of pocket to pay for the issue? The answer is yes and this is called a capital call. 

This happened to our hero. One of the condos he bought had a major defect in the construction. It turns out the developer of the building hadn’t properly sealed the building’s envelope. Because of the weather in the Seattle area, there are specific building standards for the building envelope aimed at keeping the moisture from seeping in and damaging the structure. 

The HOA sued the developer, but in all likelihood, if the HOA lost, there would be a large capital call from the owners to fund the repairs. The HOA won luckily and our hero’s crisis averted! However, he learned a hard lesson. Be very wary of the fact that there could be a capital call at any time whenever you are dealing with an HOA.



Condos can potentially be a good investment as long as you buy them right, i.e., you ensure that they cashflow, and you take into account the HOA rules and the considerations listed in this article. 

Compared to buying a stand-alone home, there is a slightly increased element of risk with renting condos. You have less control than you would of your own free-standing property. However, the flip side is that a condo and the community may be better maintained. As a result, property values could go up faster than in neighborhoods that are not governed by an HOA.

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Semi-Retired M.D. and its owners, presenters, and employees are not in the business of providing personal, financial, tax, legal or investment advice and specifically disclaims any liability, loss or risk, which is incurred as a consequence, either directly or indirectly, by the use of any of the information contained in this blog. Semi-Retired M.D., its website, this blog and any online tools, if any, do NOT provide ANY legal, accounting, securities, investment, tax or other professional services advice and are not intended to be a substitute for meeting with professional advisors. If legal advice or other expert assistance is required, the services of competent, licensed and certified professionals should be sought. In addition, Semi-Retired M.D. does not endorse ANY specific investments, investment strategies, advisors, or financial service firms.


Hi, we’re Kenji and Leti

we provide coaching and mentorship for doctors and high-income earners

Several years ago, we were newlyweds working as full-time hospitalists. On paper, it looked like we had everything: the prestigious careers, the happy marriage, the luxurious rental home, the cars, etc.

But in reality? Despite having worked for several years, we had very little savings. Despite our high income, we had very little freedom in terms of time or money.

One thing was clear: we had to do something.

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