Is buying a condo a good investment?

When prospective buyers ask, “Is buying a condo a good investment?” they’re actually asking two separate questions. 

First, they want to know whether condominiums appreciate at the same rate as single-family homes. Many homebuyers, who exclusively plan to use the condo as their primary residence, only mean this question when they ponder whether condos are a good investment. 

Some buyers also want to know how well condos cash flow. Can they earn money each month, renting out condos as either long- or short-term rentals? They may never move into the condo, and are solely interested in buying investment properties. 

Condos do offer some huge advantages for investors. They don’t come with the same maintenance headaches to begin with, as the roof and walls are shared and maintained by the condo association. 

Are condos a good investment? Like most questions worth asking, the answer is “Sometimes — it depends.”

Do Condos Appreciate in Value?

Yes, of course, condos appreciate in value over time, as a general rule. 

But do they appreciate at the same pace as single-family homes?

In most years, condos appreciate more slowly than single-family homes. For instance, Yahoo Finance notes that the median single-family home has appreciated 69% since 2012, while condos have only appreciated 27%. 

There are exceptions to that rule, however. In the 12 months preceding October 2023, for example, condos appreciated by 7.6%, more than doubling the 3.0% appreciation rate of single-family homes. 

It raises the question of why condos appreciate more slowly than single-family homes. There are several reasons, but the most important is that the value of land drives much of the appreciation of single-family homes. When you buy a condominium, you only buy the interior space and the legal right to use the common areas. You don’t own the land itself. 

Condos also come with some other downsides that turn off many buyers. For example, they come with hefty monthly condo fees, which can go up at any time. They also come with heavy restrictions on the use, decor, and behavior of condo owners. 

Outside of city centers and resort areas, most buyers prefer single-family homes.

Do Condos Cash Flow as Well as Single-Family Homes?

As a multifamily investor myself, I can tell you firsthand that multifamily properties in general typically cash flow better than single-family homes. 

But that refers to apartment buildings with a single owner. What about individual condominiums? 

There’s no one-size-fits-all answer to that question. Condos in resort areas and trendy downtown neighborhoods often see high occupancy rates as short-term vacation rentals, which can boost their cash flow above lower-occupancy single-family homes. But single-family homes often rent for more by the night. 

As long-term rentals, it just depends on the property. Condos often come with attractive amenities like pools and gyms, but they also come with high monthly condo fees. Run the numbers using a rental cash flow calculator before investing in either a condo or single-family rental property.

Is Buying a Condo a Good Investment in 2025?

In 2024, condos appreciated by an average of 4.5% nationwide according to the National Association of Realtors. Single-family homes appreciated at an average rate of 6.1%. 

That doesn’t necessarily mean that the same trend will continue throughout 2025. But it provides some context. 

A 2024 report by the Census Bureau found that more Americans have been moving out of city centers since the pandemic than have been moving into them. That doesn’t bode well for condo owners, for either cash flow or appreciation. 

Another report released in December 2024 by MoveBuddha found that Americans continue fleeing expensive metro areas in favor of more affordable, smaller cities and towns. Again, it doesn’t spell good news for condo investors. 

But again, the pendulum can swing back the other way at any time. Human beings are fickle creatures, and tastes can shift at a moment’s notice. Trendy major cities could experience a surging comeback in 2025, driving up rents and values of more dense condo housing. 

As a final thought, dense urban areas aren’t the only place you can buy condos. You may find success investing in condos for use as short-term rentals in areas with thriving tourism economies. 

Just make sure you run the occupancy numbers accurately for all 12 months of the year, not just the high season. Occupancy rates can plummet in the off-season, gutting your returns. 

Finally, note that property management fees cost more for short-term vacation rentals, because they require more management labor.

Why Is Buying a Condo Better Than Buying a House?

Condos come with some enormous advantages. As you consider investing in a condominium, keep the following upsides in mind.

Lower Purchase Price

The NAR report above found that the average single-family home cost $409,300 at the end of 2024. By comparison, condos averaged $359,000 — a $50,000 discount.

Lower Maintenance

Condominium owners don’t have to maintain the roof, the outer walls, the foundation, the grounds, or the common amenities such as pools and gyms. It’s cheaper to maintain a single roof and foundation, after all, and the association takes care of this maintenance. 

Owners aren’t completely off the hook, however. They must still maintain the interior of their units, such as inner walls, appliances, and other fixtures. And of course, they must pay their monthly association dues. 

Still, this reduces the unexpected maintenance costs, making it easier to budget for them.

Shared Amenities

Condominium owners enjoy shared amenities such as swimming pools, workout rooms, hot tubs, saunas, covered parking, and more. “Pooling” these costs creates an economy of scale, for a relatively small cost per resident. 

In contrast, these amenities are often prohibitively expensive to create and maintain on your own. 

Some condo buildings even have event spaces or coworking spaces, either for rent or included in the cost of the condo fees.

Community

The best condos create a true sense of community, where people get to know, like, and trust their neighbors. Think cookouts, holiday parties, happy hours, and more. 

When done right, the community vibe makes residents enjoy living there more and want to stick around longer.

What You Should Know When Buying a Condo

For all those upsides, condos come with plenty of other drawbacks and risks. 

Make sure you understand the following as you weigh the pros and cons. 

Condo Fees

One of the greatest downsides to owning a condo is the monthly condominium fee. 

Expect to pay hundreds or even thousands each month toward condo fees. Worst of all, the association can raise these fees if the existing revenue isn’t enough to cover all joint expenses. 

Or if the association isn’t managing its money efficiently. 

For landlords, these fees can eat into their cash flow. And for homeowners, they can drag up the total monthly cost of ownership.

Slower Appreciation

As touched on above, condos tend to appreciate more slowly than single-family homes. 

That obviously reduces the return for investors and means a smaller payout for homeowners. Beyond that, a slow pace of appreciation also means it takes longer for owners to break even on selling the property.

Longer Breakeven Horizon

The “breakeven horizon” refers to the length of time it takes for a property’s appreciation to equal the combined purchase and selling closing costs. If it costs $10,000 to buy a property, and $40,000 to sell the same property, how long will it take for the property to appreciate by $50,000 so the buyer theoretically breaks even on the ownership? 

A single-family home might have a likely breakeven horizon of three years, while a comparable condo in the same neighborhood might have a five-year breakeven horizon, given the slower rate of appreciation. 

That longer breakeven horizon locks you into ownership longer, and reduces the liquidity even further. 

Minimal Customizability

When you own a single-family home, you can do anything you want to it. You can knock the entire house down and rebuild from scratch if you so choose. 

You can make almost no changes to a condominium. The condo association may not even let you paint the front door a different color. 

You certainly can’t boost the cash flow by adding an accessory dwelling unit (ADU), or splitting into multiple rental units. What you see is what you get, other than upgrading the kitchen and bathrooms.

Other Condo Restrictions

Some condo associations put other restrictions on usage as well, such as limiting the number or types of pets, or banning them altogether. That makes them a non-starter for many homeowners, and can also eliminate a huge percentage of the renter pool. 

For that matter, some condo associations don’t allow the units to be leased at all. Imagine buying a condo and moving in, with the plan to live there for a year or two and then lease it once you move out. Except you find out after buying that the bylaws don’t allow owners to rent out their units. So much for your condo investment property.

How to Find Your ROI for Condo Investing

For real estate investors, every buying decision comes down to return on investment. 

Yes, that includes appreciation. You can and should look at the average annual appreciation for condos in your target market over the last few decades. But you can’t predict appreciation, so you have to estimate it. 

Cash flow is another story altogether. You don’t have to forecast it — you can calculate it based on today’s numbers.

Calculating Condo Cash Flow

As a general rule of thumb (known as the 50% Rule in the industry), non-mortgage expenses tend to add up to around 50% of the rent. 

Of course, you want to calculate a prospective rental property’s cash flow with more precision than that. Start by researching the market rent for comparable units. You may even find identical condos in the same building that have recently been rented, for ideal comps. 

Next, add up the following non-mortgage expenses:

• Condo fees
• Vacancy rate
• Repairs and maintenance (long-term average)
• Property taxes
• Landlord insurance
• Property management fees
• Accounting, legal, marketing, and other miscellaneous costs

If you plan to take out a mortgage loan, calculate your likely principal and interest payment on that as well. 

Finally, subtract all of the expenses from the monthly rent. How much will the unit average for you be each month? How much cash flow can you expect in the first year? 

To come up with your cash-on-cash return, divide that net annual cash flow amount by the total cash you’ll have to invest out of your own pocket to buy the property. That includes your down payment, closing costs, and any initial repairs. Play around with the numbers using a rental cash flow calculator to determine the cash-on-cash return for any prospective rental property purchase. Rental calculators include mortgage loan calculators to determine your monthly mortgage payment.

Sample Condo Cash Flow Calculation

Say you find a condo for $200,000 that looks promising as a rental investment property. 

It rents for $2,000 per month. The monthly non-mortgage expenses add up as follows:

• Condo fees: $400
• Vacancy rate: 5% ($100)
• Repairs and maintenance: 6% ($120)
• Property taxes: $150
• Landlord insurance: $120
• Property management fees: 8% ($160)
• Accounting, legal, marketing, and other miscellaneous costs: 1% ($20)

Total Non-Mortgage Expenses: $1,070

You find a 30-year rental property mortgage at 7% interest requiring a 20% down payment, or $40,000. Your $160,000 mortgage at 7% will come to $1,064. 

That’s a problem — your long-term average expenses will add up to $2,134 each month. That puts you in the hole by $134 per month. Detecting a motivated seller, you negotiate the price down to $170,000. That drops your mortgage payment down to $905, which leaves you with a monthly cash flow of $25. That’s nothing to write home about, but you feel confident that you can raise the rent by 5% after the first year. That will push the rent up to $2,100, while your mortgage payment will remain fixed.

Cash-on-Cash Return

In the example above, you’ll need a down payment of $34,000, plus let’s say buyer closing costs of $4,000 and initial repairs of $2,000. That comes to a total of $40,000 of your own cash out-of-pocket. 

In the first year, with just $25 a month in cash flow, you’ll only earn $300. Divide that by your total cash investment of $40,000, for a cash-on-cash return of just 0.75%. 

But in the second year of ownership, say you do raise the rent by 5% to $2,100. If none of your expenses go up, that leaves you with monthly cash flow of $125, or $1,500 per year. That comes to a cash-on-cash return of 3.75%. Still nothing to get excited about, but a huge improvement. 

Granted, your non-mortgage expenses will rise over time. But your mortgage payment will remain fixed, allowing your cash flow to jump upward every single year. 

Are condos a good investment? It depends on the cash flow and appreciation you expect. In the example numbers outlined here, that condo may not make a good investment. But you may find a condo offering a 5% cash-on-cash return in Year 1, likely to rise to an 8% cash-on-cash return in Year 2, which may appeal to you more. 

Should I Buy a Condo or a House?

If you’re planning to buy for your personal use, the decision comes down to your personal preferences.

Do you want to outsource most of the maintenance headaches to someone else? Do you want communal amenities such as a pool or gym? Don’t want to hassle with mowing the lawn or shoveling snow? Do the risk of slower appreciation and a longer breakeven horizon not really bother you? A condo might make a perfect fit for your needs. 

In contrast, would you like a larger home with plenty of privacy and outdoor space? Want to customize it to your heart’s content? Does appreciation mean a lot to you? You should probably buy a single-family home. 

For investors, the decision isn’t muddied by personal preferences. It just comes down to the numbers. You can answer the question of “Is buying a condo a good investment?” by simply running the numbers through a rental cash flow calculator. Make sure you tack on estimated appreciation rates as well, when comparing a single-family versus condo rental property.

Final Thoughts: Are Condos a Good Investment?

Condos can make good investments, but they do tend to appreciate more slowly than single-family homes. In 2024, condos appreciated at about three-quarters the rate of single-family homes, but in 2023, condos more than doubled the appreciation of single-family houses. It’s too early to say how condo appreciation will perform in 2025, but history shows a slower average appreciation rate. 

Monthly condo association fees can also put a dent in the unit’s cash flow. That said, you don’t have to budget nearly as much for maintenance and repairs when you calculate the cash flow for a condo. 

Some condos make excellent vacation rentals, especially in areas rich with tourism. Just make sure you account for seasonal differences in occupancy rates. 

You can also consider buying a condo that you can periodically use yourself as a second home, when it’s not rented out. If you get two weeks of good usage out of it each year, that might tip the balance in favor of buying, even if it cash flows only a small profit in the first year. 

Just make sure you make an informed decision based on the numbers, not emotion. If a property doesn’t generate cash flow, keep looking until you find a property that does pencil well.