Investing in a condo property is an effective way to utilize La Quinta, CA real estate to generate and maximize earning opportunities. But before you can reap the benefits of your investment, careful preparation and consideration should be made to ensure that it is sound and sustainable.
One good way to evaluate the feasibility of your condo investment is to break down the essential numbers involved. In this blog post, we’ll look through the costs and expenses besides the condo property’s asking price.
Let’s use rough estimates for now. Say you bought a condo unit for $100,000—paying the full amount in cash—and rent it out for $1,500 per month ($18,000 annually). This equates to an 18% gain after just one year. However, there’s a lot more to consider. You still need to factor in a few other expenses that will cut into your earnings.
It’s important to note that in the sample breakdown shown above, the condo property was purchased with a full cash payment. This means that the property owner no longer has to worry about loan interest.
If you are going to take out a mortgage to finance your condo investment, however, you should include the cost of interest in your budget.
Condo association fees
Condominium associations collect monthly dues to sustain the upkeep and administration of the property.
Landlords have the option to assign the payment of association dues to their tenants. However, this comes with the risk of losing the property if the tenant fails to pay. As the property owner, you may be better off shouldering this cost.
Maintenance and repairs
Owning a condo property means that the building owner takes responsibility over the upkeep of the building’s shared areas and amenities. These costs are covered in your regular condo association dues, which means you can incorporate this expense into the rent that you collect from your tenant.
Your regular contributions to the condo association typically don’t cover the maintenance needs within your unit, however. It also pays to be prepared for unforeseen appliance malfunctions and breakdowns that may require unplanned repairs or replacements.
Real estate taxes are an annual expense that all property owners must pay. Taxes vary from one location to another, so consult your real estate agent about the real estate tax rates in your area for a more accurate estimate.
Rental property insurance, or landlord insurance, is distinct from the standard homeowner’s insurance policy. This type of insurance is specifically designed to protect property owners from the risks of structural damage to the property or the loss of rental income in case of an extended vacancy. Coverage varies depending on the specific policy you avail or what you and the insurance company agree to cover.
There are instances when a condo property will require an expensive repair or renovation project. To support these, the condo association will charge special assessments on unit owners.
If you’re looking at a potential condo investment property, inquire about any ongoing or upcoming special assessments that may affect your budgeting.
To learn more about the outstanding real estate options and opportunities in La Quinta, CA, talk to the area’s most trusted Realtor, Kathleen O’Keefe Galigher. Call 760.567.7822 or send a message here for more information.