Condo or House: Which is Better for an Investment Property?

If you are looking at potential rental properties in St. George, one of the key decisions you’ll face is choosing between purchasing a condo or a house. Both types of properties can be lucrative investments, but each comes with its own set of advantages, drawbacks, and responsibilities.

Deciding between a condo and a house for your rental property largely depends on your financial goals, target renters, and how much time and effort you’re willing to invest in property management. Here's what you need to keep in mind as you're creating your plan.

Initial Purchase Price

One of the first aspects that investors evaluate when choosing between a condo and a house is the initial purchase price. In general, condos in St. George tend to be the more affordable choice, but this can vary depending on location and community amenities. Condos do often come with a lower cost of entry, so they're an attractive option for first-time real estate investors or those with limited capital. You might find it easier to break into the rental market by purchasing a condo, as the down payment, property taxes, and insurance costs are usually lower. However, pay careful attention to HOA or condo fees because those can be higher than you think in some of the communities here with luxury amenities. 

In contrast, single-family homes, particularly in the most desirable neighborhoods, tend to come with a higher price tag. Keep in mind that while houses require a larger initial investment, they often appreciate in value more rapidly than condos, so they are generally considered to be a solid long-term investment. If you have a larger budget and are looking for a property with the potential for higher appreciation, a house might be the better choice.

Maintenance and Repairs

People call a rental property a source of passive income, but that doesn't mean it's without any ongoing responsibilities. The ongoing costs and responsibilities associated with maintaining a rental property vary significantly between condos and houses.

Condos come with the advantage of shared maintenance, so you can expect that many of the upkeep tasks—such as lawn care, exterior repairs, roof maintenance, and sometimes even pest control—are handled by the condo association. These services are paid for through condo fees, which are typically fixed and predictable (but remember to ask about whether these fees can fluctuate when you're considering a specific property). This can save you time and effort as a landlord, as the bulk of property maintenance is outsourced.

However, HOA fees can add up quickly and eat into your rental income. Depending on the property, these fees may cover everything from building insurance to amenities like swimming pools and gyms. While it simplifies management, it’s important to account for this cost in your calculations and the rental rate you plan to charge, as high fees could reduce your overall profitability.

With a single-family home, you are entirely responsible for the upkeep and maintenance of the property. This includes landscaping, roof repairs, plumbing issues, and any exterior work. While this requires more effort and potentially more money in maintenance costs, you retain full control over these expenses, without having to rely on an HOA. If you’re comfortable with handling or outsourcing maintenance, a house may give you more flexibility in how you manage and care for the property and what your costs will be. 

Income Potential

The rental income you can expect from a condo versus a house will depend largely on the location, size, and amenities of the property. Condos may appeal to young professionals, students, or retirees who are looking for lower-maintenance living with easy access to amenities. They can also be a great option for short term rentals if the amenities create a resort-style setting. If your target market is tenants who prioritize convenience and are willing to pay for amenities like gyms, pools, and gated security, a condo could be a great investment.

That said, condos may have limitations when it comes to rental income growth. Some condo associations place restrictions on how many units in the building can be rented at any given time or how long the lease period needs to be. Some condos are prohibited from nightly rentals, too. This could make it difficult to rent out your condo in the way you planned. Furthermore, condo associations often have rules that regulate what you can and cannot do with the property, such as restrictions on pets or noise. It doesn't mean a condo is a bad idea altogether, it just means you need a clear plan and to check that plan with the condo regulations.

Single-family homes generally have fewer restrictions and allow for more freedom in setting rental terms. Confirm with the HOA if there is one, but you're likely to find less regulations in this scenario. These properties tend to attract families, long-term renters, or individuals who want more space and privacy, which can also translate into higher rental prices. If you find a house without an HOA, you'll have even more flexibility and control over how you manage the rental. 

Long Term Appreciation

Savvy real estate investors look not only at rental income but also at the long-term appreciation of the property. Historically, single-family homes tend to appreciate at a faster rate than condos. This is largely because houses are usually located in neighborhoods with higher demand and more land, which contributes to property value growth.

Condos sometimes appreciate more slowly due to factors such as shared ownership of the land and the possible saturation of condo units in the market, but this is not always the case. We can help advise you on the projections for a specific condo community in St George that you are considering. Condos can still be a solid investment, especially if you purchase in a high-demand location with limited available housing. 

Ready to begin the search for your St. George rental property for sale? Contact us any time to get started.