What do you mean...I can't rent out my condo?

Condos aren't common (yet) in Spokane real estate, condos for sale in Spokane represent less than 5% of all Spokane homes for sale.

However, for those that choose to purchase a condo as their Spokane real estate investment, this is an important topic.

A client of mine, who purchased a condo about a year ago, wrote to me today asking about limiting the percentage of condo units that can be used as rentals to 10%:

A neighbor of came by and had a petition to sign - that would limit the percentage of condos that could be rented - to ten percent of the total number of condos.

At first thought, it sounded good to me because it prevents the neighborhood from deteriorating with ever-increasing numbers of rental units. However, on second thought, I wondered: If that's such a good idea, why permit even ten percent? Why not vote to prohibit rentals altogether?

The rub, as I see it, is that after the first ten percent of owners eventually rent their condos out - then effectively virtually nobody else can do it regardless of unexpected circumstances or need. But, what would I do if I were transferred to another job location and forced to move - and found I could not sell at a reasonable price because of some downturn in the resale value of the condo?

I'm conflicted over the pros and cons of this issue - so I'm really curious about your take on it. I fully appreciate how dreadful it would be to have 1/2 the condos eventually turned into rentals. All the riff-raff would make the condo little different from living in an apartment - and that would obviously torpedo the resale value of the units.

On the other hand, I dislike the idea that the first 10% of condo owners to rent their units out, are free to do so if it suits them - but then the gangplank is pulled up and for all practical purposes nobody else can do it - even if there was an unexpected and important need....

What's your take on this interesting conundrum?

My Response: It's a good policy...

As far as a 10% cap on rentals, I tend to agree with it. My experience is that a 0% cap leads to lower property values and no cap leads to lower property values.

See also: Top 5 Spokane real estate investments

The reason 0% leads to lower property values is because you've decreased demand for the units by effectively cutting out any potential buyer who has either long-term or short-term plans of turning their new home into a rental. I actually had this happen. A client of mine wanted to purchase a condo and turn it into a rental in about 2 years when he purchased another home. We found a wonderful condo, quite a good value (cheap), and he really wanted to purchase it. I found out the association didn't allow ANY units to be rentals, so he ended up not putting an offer on the condo.

The reason no cap leads to lower property values is...

... continued... there is plenty more...

Such as:
Why 0% cap leads to lower property demand
Why no cap can lead to lower property values
How to get to be in the 10% that CAN use their property as a rental

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Purchasing a condo as an investment

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