Question 1

What's a good cap rate for a condo investment?

Accepted Answer

For condos, a 5-8% cap rate is considered solid in most markets. Urban condos in high-demand areas often sit at 4-6%, while suburban or secondary markets can hit 7-10%. Always factor in HOA fees — they can cut your effective cap rate by 1-3 points.

Question 2

Are condos harder to finance than single-family homes?

Accepted Answer

Yes — lenders apply extra scrutiny to condo projects. They check the HOA's reserve fund, owner-occupancy ratio (typically want 50%+ owner-occupied), litigation history, and insurance coverage. FHA-approved condo projects are easier to finance.

Question 3

How do HOA fees affect investment returns?

Accepted Answer

HOA fees directly reduce your net operating income. A $400/month HOA fee equals $4,800/year off your NOI. Always compare the HOA cost against what it covers (insurance, water, maintenance) — sometimes high fees actually save money vs managing those expenses yourself.

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