One of the most frequent questions I get from investors is whether condos or single family homes are the best investment. My answer is that it depends on the numbers. Right now there is a glut of condos and apartments for rent in Las Vegas so the time-to-rent is longer and rental rates are lower than they were last year for condos. Thus the current market tends to make me lean towards low priced single family homes instead of condos under the current market conditions. Low priced single family homes (less than $160,000 with 3 bedrooms, 2 baths and a two car garage) which will rent in the rental "sweet spot" (<$1,200/mo). Plus, these properties are tending to rent fairly rapidly (<45 days). So, there is no static answer on condos vs single family. Which is a better buy will depend on your goals and current market conditions.
However, there is one advantage of single family homes over condos that does not change with market conditions: condos typically have higher monthly association fees than comparable single family homes. The rest of this article examines this single aspect of the condo vs. single family home question.
Below are two identically priced properties. I ran the basic calculations assuming 20% down and a typical investor loan.
| Condo Vs. Single Family | Condo | Single Family | Notes |
| Purchase Price | $100,000 | $100,000 | |
| Down % | 20.00% | 20.00% | |
| Net Amount | $20,000 | $20,000 | |
| Total Financed | $80,000 | $80,000 | |
| Interest Rate | 7.00% | 7.25% | #1 |
| Loan Term (years) | 30 | 30 | |
| Monthly Payment | $532 | $546 | |
| Property Tax Rate | 1.00% | 1.00% | |
| Monthly Property Tax | $83 | $83 | |
| Insurance | $30 | $40 | #2 |
| HOA Estimate (Monthly) | $160 | $35 | #3 |
| Monthly exterior maintenance | $0 | $25 | #4 |
| Total Monthly Payment | $806 | $729 |
As you probably noted, the primary difference between the total monthly payments for the condo vs. the single family home is the higher association fee for a condo. What if I increased the price of the single family home such that the total monthly payments were the same?
| Condo Vs. Single Family | Condo | Single Family |
| Purchase Price | $100,000 | $116,801 |
| Down % | 20.00% | 20.00% |
| Net Amount | $20,000 | $22,446 |
| Total Financed | $80,000 | $89,783 |
| Interest Rate | 7.00% | 7.25% |
| Loan Term (years) | 30 | 30 |
| Monthly Payment | $532 | $612 |
| Property Tax Rate | 1.00% | 1.00% |
| Monthly Property Tax | $83 | $94 |
| Insurance | $30 | $40 |
| HOA Estimate (Monthly) | $160 | $35 |
| Monthly exterior maintenance | $0 | $25 |
| Total Monthly Payment | $806 | $806 |
Due to the increased interest rate for condos and the higher HOA fee, a $100,000 condo will have a similar total monthly payment as a $116,000 single family home. However, the above only covers part of the differences between condos and single family homes.
Another consideration is that in the current market you can occasionally purchase nice two bedroom condos for between $50,000 and $60,000 (if you know where to look). So, how would you fare if you purchased two $55,000 condos vs one $110,000 single family property? The answer to this is again dependant on rental rates and vacancy rates (or time-to-rent). If you have a time-to-rent of 45 days with single family and 90 days with condos, then the single family home is likely a safer investment; especially if each condo rented for $600/mo and the single family home rented for $1,200/mo. Again, its a numbers game.
In conclusion, I don't believe condos are fundamentally a better investment or worse investment than single family homes. It depends on market conditions and your goals.
Contact me if you are considering buying or selling Las Vegas real estate. You will be glad you did.
...Eric
Eric Fernwood
RE/MAX CENTRAL
8400 W. Sahara Ave
Las Vegas NV 89117
Email: EricFernwood@gmail.com
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