Condos are a good investment, at least they can be a good investment as long as all the boxes for smart condo investment are checked. The fundamental way for a condo to be a good investment is to keep the fees to a minimum and the income or capital gains to a maximum. Now, in order to do that, you need to navigate a few things. Between HOA fees, rental restrictions, and limited tax perks, you’ve got to do the math before you jump in.
Why is buying a condo different than a house?
Buying a condo isn’t like buying a house because you are not getting a yard, a private driveway, or full control over every square inch of the property. What you’re really buying is the space inside your unit, and a slice of everything else shared with the building’s residents.
The condo itself? Yours. The roof, pool, parking lot, lobby, and landscaping? Shared. All of that is maintained by the homeowners association (HOA), which charges you a monthly fee to keep things running and to enforce community rules that may or may not work in your favor if you’re trying to rent it out.
How condos stack up against other properties:
- You own the interior space, not the land or exterior walls
- HOA handles most of the exterior maintenance and charges you for it
- There are often rules about rentals, especially short-term stays
- Condos usually cost less than standalone homes in the same area
Why some investors swear by condos
Everyone probably agrees that condos can be a great way to get into real estate without undertaking a full-blown renovation project or spending half a million on a single-family home. It’s a stepping stone that’s not quite as easy as sticking your money in a passive ETF like VOO or SPY, but in terms of maintenance, it’s better than a single-family home. Why is this so important? It’s essential, first and foremost, for remote landlords, Airbnb hosts, and anyone looking to invest in high-demand urban or resort areas where land is expensive and maintenance is a challenge. If a condo owner passes away without a will, heirs in Illinois and ohter states may be able to claim the property using a small estate affidavit, avoiding probate and simplifying transfer. But remember, not every condo is going to be a great deal. If the numbers don’t pencil out, or if the HOA is a nightmare, you could end up stuck with a property that hemorrhages cash.
Lower cost of entry
Condos usually run 15–30% cheaper than single-family homes in the same area, which is a big difference, particularly in a time where housing unaffordability in the US is at an all-time high. In high-cost cities like Denver and Miami, this can be huge.
Low maintenance
No lawn to mow, no shingles to replace, no gargantuan piles of snow to shovel in the freezing cold. The HOA handles the outside, leaving you to manage the guest experience inside.
Built-in demand
Most of the time, condos are going to be located in high-traffic areas like beaches, business districts, and nightlife. These are the same type of locations that do well for short-term rental landlords, such as those using Airbnb and Vrbo.
Amenities are a huge plus
Pools, gym, security, and table tennis. These little extras help listings stand out, justify higher rates, and keep guests coming back, particularly in places that have pool access.
Cheaper insurance
You’re not covering the whole building, just the inside. That usually means lower premiums compared to insuring a house.
Where condos can hurt you
By no means are condos perfect, they come with their own downsides, restrictions, and headaches that are unique unto themselves. What are the biggest risks? Hidden costs, limited control, and restrictive HOA rules can kill your rental strategy.
Things that can make or break a condo deal:
| Condo investment risk | Details |
|---|---|
| HOA fees | Monthly dues typically range from $200 to $800+, often increasing over time and directly reducing profit margins. |
| Rental restrictions | Many HOAs ban short-term rentals or enforce minimum lease terms (30–90 days), limiting Airbnb or VRBO use. |
| Special assessments | If reserves are low, you could face surprise costs (e.g., $5K+) for major repairs like roofs or elevators. |
| Weaker appreciation | Without land ownership, condos tend to appreciate more slowly than single-family homes, especially in oversupplied markets. |
| Financing challenges | Lenders may deny loans or increase rates for buildings with high investor ratios, legal issues, or underfunded reserves. |
What kind of condos are actually worth buying?
Not all condos are created equal. Some are cash-flow machines in prime tourist zones. Others are budget traps that’ll drain your reserves and limit your upside. If you’re thinking about buying, make sure the building checks these boxes first:
- The HOA explicitly allows short-term or long-term rentals (don’t assume, get it in writing)
- The building is in a high-demand zone: beach, downtown, ski town, college district, etc.
- HOA reserves are healthy. Ask for the latest financials and reserve studies
- Monthly HOA fees are reasonable relative to projected income
- No pending litigation and at least 50% owner occupancy (this matters for financing)
How condos stack up against other rental property types
Condos can work great in the right context, but they are just one option on the rainbow spectrum of rental properties. Depending on who you are and what you are trying o do, you might want to weigh them vs. other property options such as single-family homes, duplexes, or even small multifamily buildings.
Before you decide where to put your capital, it’s worth breaking down how each of these property types performs for investors.
Quick breakdown of the main options:
Condos
Condos work well for hands-off investing in busy areas, especially near beaches, downtowns, or transit hubs. For example, if a unit in a Miami high-rise generates substantial Airbnb income, the HOA might still intervene and shut down short-term rentals with little notice. This lack of control can have an adverse effect on an investment that’s meant to generate an ongoing return,
Single-family homes
Single-family properties give full decision-making power and often appreciate better over time. A landlord who owns a standalone home in a growing suburb can choose whether to rent short-term, long-term, or renovate for resale. However, due to the fact that there is not he convenience of shared maintenance, they’re also on the hook for every repair, from leaky roofs to broken furnaces.
Duplexes
Duplexes deliver dual income while keeping management under one roof. For example, if one unit covers the mortgage and the other produces profit, the owner can build equity quickly. That being said, hands-on involvement is needed, especially if tenant disputes or plumbing issues arise between the walls.
Multifamily (3+ units)
Multifamily buildings offer bigger returns and better efficiency per door. For example, if a fourplex fills all units with long-term tenants, the rent roll can support hiring a property manager and building a true business.
Here’s a side-by-side comparison to help visualize the tradeoffs:
| Property type | Avg. price | Rental control | Maintenance responsibility | Cash flow potential | Cost segregation impact |
|---|---|---|---|---|---|
| Condo | $250,000 | Moderate (depends on HOA) | Low (HOA handles most) | Moderate | Interior components only |
| Single-family home | $350,000 | High (no HOA interference) | High (you’re in charge) | High | Full building depreciation |
| Duplex | $450,000 | High | Medium | High | Full structure + land components |
| Multifamily (3+ units) | $700,000+ | High | Medium to High (onsite or managed) | Very High | Extensive depreciation opportunities across all systems and components |
Note: Multifamily buildings can unlock significant cost segregation benefits, especially when systems like HVAC, plumbing, and interior finishes are broken down unit by unit. For investors scaling up, multifamily often delivers the best return-to-effort ratio—if you know how to manage or outsource it effectively.
ROI breakdown: How do condos really perform against other rental types?
Condos work well for hands-off investing in busy areas, especially near beaches, downtowns, or transit hubs. For example, if a unit in a Miami high-rise generates substantial Airbnb income, the HOA might still intervene and shut down short-term rentals with little notice. This lack of control can have an adverse effect on an investment that’s meant to generate an ongoing return,
Let’s cut to the chase, ROI matters. And depending on the type of property you buy, your return on investment can vary widely. Condos are often easier to manage but come with caps on upside, especially when compared to duplexes or standalone homes. To help you see how things shake out across different asset types, here’s a breakdown of average ROI by property type in three short-term rental hotspots: Orlando, Austin, and San Diego.
This isn’t theory, it’s what investors are actually seeing in the field.
Real-world comparison: Condo vs duplex in high-performing Airbnb markets
Everyone loves a bit of data, but nothing beats seeing how the numbers play out in real life. Data is great, but nothing beats seeing how the numbers actually play out. Let’s examine two real-world investment scenarios from two distinct types of short-term rental properties: a one-bedroom condo in Miami Beach and a duplex in Austin. Both properties are used for Airbnb, but the ownership structure, cost profile, and profit margins vary significantly. This side-by-side breakdown will show you what kind of performance to expect and what variables matter most when you’re trying to decide where to invest.
Airbnb condo in Miami Beach
A solo investor buys a 1-bedroom condo in a short-term-rental-approved building near the Miami Beach boardwalk for $310,000. The goal? Run a lean Airbnb setup that requires minimal involvement while staying profitable year-round. The investor handles the listings and hires cleaners after each guest. Average occupancy is 22 nights/month with a nightly rate of $165. Here’s the financial breakdown:
| Monthly item | Amount |
|---|---|
| Gross rental income | $3,630 |
| HOA fees | –$400 |
| Cleaning & maintenance | –$350 |
| Mortgage (6% on $250K loan) | –$1,498 |
| Insurance & utilities | –$250 |
| Net monthly cash flow | $1,132 |
Even with $400 in HOA fees, the condo cash flows because the investor did the math upfront. The HOA allows short-term rentals, and the building’s location keeps occupancy strong. This is a great example of a condo working, but only when restrictions and costs are fully understood in advance!
Short-term duplex in Austin, TX
A more experienced investor acquires a small duplex in East Austin for $520,000. Both sides of the duplex are converted into Airbnb listings. The investor furnishes each unit similarly, charges $180 per night, and sees about 20 nights of bookings per month per unit. The property does not belong to an HOA, so there are no usage restrictions. The investor self-manages but uses dynamic pricing tools and professional cleaners.
| Monthly item | Amount |
|---|---|
| Gross rental income (2 units x $180 x 20 nights) | $7,200 |
| Cleaning & maintenance | –$600 |
| Mortgage (6% on $400K loan) | –$2,395 |
| Insurance & utilities | –$500 |
| Net monthly cash flow | $3,705 |
While the duplex required a higher upfront investment, the cash flow is significantly stronger. There are no HOA restrictions, the investor has full control over operations, and cost segregation on a duplex provides much broader depreciation benefits; including exterior components and land improvements.
How cost segregation works for condos
Cost segregation is one of the most powerful tools real estate investors have to reduce their taxable income, especially in the early years of ownership. It works by identifying and reclassifying certain parts of a property (think cabinets, appliances, flooring) into shorter depreciation schedules, which means you get to write off more, faster. That boosts your cash flow and keeps more money in your pocket during the years when you’re investing heavily in growth.
Now, when it comes to condos, the opportunity is still there, but the scope is narrower. Why, you ask? Because as a condo owner, you don’t own the exterior walls, roof, or shared systems like plumbing stacks or fire suppression. Those belong to the building and are managed by the HOA. But inside your unit? That’s fair game for depreciation.
What’s eligible inside a condo unit?
- Cabinetry and countertops
- Flooring and tilework (hardwood, vinyl, ceramic, etc.)
- Lighting fixtures and ceiling fans
- Plumbing fixtures (sinks, toilets, showers)
- HVAC units (if located entirely within your unit and not shared)
- Built-in furniture, custom shelving, and appliances
If your condo has been recently renovated or features high-end interior finishes, your depreciation potential is even higher. For investors who own multiple condo units or are scaling into vacation rental portfolios, these deductions add up quickly. A proper cost segregation study can often reclassify $30,000 to $70,000 worth of assets per unit, front-loading your deductions into the first five or seven years instead of spreading them out over 27.5.
So, are condos a good investment?
Condos are definitely a good investment! But only if you know how to vet the deal and understand the risk parameters and downsides. HOA rules can kill your rental income before you ever get started, and surprise assessments or restrictions can eat your profits. All things being equal, the great part about condos is that they are usually in areas that have strong rental markets. A good condo in an area that’s being gentrified and complete with a booming nightlife, can be a great score; just make sure you check out the fees!!
FAQ
Do condo HOAs ever change their rental rules?
Yes, and it’s more common than most investors realize. An HOA can vote to add or tighten restrictions on short-term or long-term rentals, sometimes with little notice. That’s why it’s critical to review meeting minutes, attend board meetings when possible, and factor in this risk when evaluating a condo purchase for rental income.
Can I use a condo as a corporate or mid-term rental?
In many cases, yes. If short-term stays under 30 days are restricted, a condo may still work well as a corporate or mid-term rental (30–90 days). These types of rentals cater to business travelers, medical professionals, or relocation clients and can offer stable income without triggering HOA violations.
How often should I update a cost segregation study on a condo?
Generally, one study per unit is enough unless you do a major renovation or upgrade interior assets significantly. If you replace high-value items like flooring, kitchen cabinets, or HVAC systems, it may be worth conducting an updated study to maximize new depreciation opportunities. Always consult your CPA to determine timing and eligibility.
