Are Traverse City Condos A Good Investment?

Is a low-maintenance condo in Traverse City the right move for you or your portfolio? With year-round demand from healthcare and education jobs and a powerful seasonal tourism pull, condos here can offer both lifestyle and income potential. The key is knowing how building rules, fees, financing, and seasonality shape returns. In this guide, you’ll learn how to evaluate a Traverse City condo like an investor, understand local rental options, and avoid common pitfalls. Let’s dive in.

Why Traverse City condos stand out

Traverse City and Grand Traverse County blend steady, year-round demand with a strong tourism surge. Local healthcare and education employers support consistent housing needs, while lake life, wine country, and a vibrant downtown attract second-home and vacation renters. Retirees and remote workers also add to long-term demand.

Condo options range from downtown units and West Bay waterfront residences to buildings near the medical campus and suburban communities. Each has different price points, amenities, and rental profiles. Because this is a smaller, seasonal market, sales and rental comps can be thinner than in big cities, so precise valuation takes careful local benchmarking.

Two paths: long-term vs short-term

Long-term rentals

Long-term leases serve year-round residents, including local workforce, students, and medical staff. Demand is influenced by proximity to employers, transit, and daily conveniences. Your net yield depends on market rent, HOA fees, property taxes, insurance, and any management costs.

Long-term rentals can offer steadier occupancy and simpler operations. Focus on features that renters value: parking, in-unit laundry, storage, and functional layouts. Plan for occasional vacancy, turnovers, and maintenance reserves.

Short-term and vacation rentals

Short-term rentals benefit from seasonal tourism, with peak demand typically late spring through early fall. Higher nightly rates in peak months can drive a large share of annual revenue, but off-season occupancy is usually lower. Your results depend on location, views, amenities, and how effectively you manage pricing and operations.

Before you count on STR income, confirm three things: city or county rules and licensing, the condo association’s short-term rental policies, and any lender restrictions. Some associations prohibit STRs or set minimum lease terms, and local taxes or registration can apply.

How to evaluate returns

Use a simple framework and local comps to set expectations:

• Gross rental yield = annual gross rent / purchase price.
• Net operating income (NOI) = gross rent − operating expenses (excluding financing).
• Capitalization rate = NOI / purchase price.
• Cash-on-cash return = annual pre-tax cash flow / cash invested.

In smaller, tourism-driven markets, returns vary by building, location, and rental strategy. Waterfront or high-amenity units often command higher prices and fees, which can compress cap rates even when demand is strong. For STRs, model seasonality explicitly and avoid relying on peak-month performance alone.

Expenses that shape your bottom line

Condo ownership concentrates several cost drivers that you should underwrite carefully:

• HOA fees. Often cover reserves, exterior maintenance, common utilities, snow removal, landscaping, insurance for common elements, and amenities. Higher fees reduce net yield but may offset individual maintenance costs.
• Special assessments. If reserves are thin or major repairs are due, assessments can be significant. Review the association’s reserve study and history.
• Insurance. Most owners carry an HO-6 policy. Check the master policy and your coverage responsibilities. Waterfront exposure and building age can affect premiums.
• Property taxes and local fees. Verify current tax rates and any local levies. Short-term rentals may also owe transient occupancy or bed taxes in addition to regular property taxes.
• Operating costs. Plan for vacancy, turnover, utilities you cover, furnishing for STRs, property management fees, cleaning, and a maintenance reserve.

Financing and condo approvals

Condo financing works differently than single-family loans. Many lenders require project approval and review HOA health. Investor loans often require larger down payments and can have higher rates. High investor ratios, litigation, or governance issues can limit financing options.

If you plan to rent short term, verify lender guidelines early. Some loan programs and buildings restrict STR use or require owner-occupancy ratios. Align your financing with your intended strategy before you write an offer.

Local rules and HOA policies

Short-term rental feasibility depends on local regulations and your building’s bylaws. Municipal rules may require licensing, safety standards, and tax collection, and HOAs can prohibit or limit STRs or set minimum lease lengths. Always confirm current city or county rules and your association’s governing documents before you rely on nightly rental income.

Beyond rental policies, assess governance and financial health. Review reserves, budgets, meeting minutes, insurance certificates, and any history of special assessments. Ask about pending litigation and board or management turnover.

Building condition and maintenance

For condos, the HOA typically maintains roofs, exterior, and common systems, but you still carry risk through fees and assessments. In older buildings, evaluate waterproofing, elevator condition, mechanicals, and HVAC replacement history. Waterfront and winter weather exposure can increase maintenance needs and insurance costs over time.

Key risks to weigh

• Seasonality. Summer demand is strong, but winter occupancy can be lower. This affects STR revenue and cash flow timing.
• Liquidity. In a smaller market, condos can take longer to sell than single-family homes, especially if buyers are mostly investors. Prime locations like downtown, waterfront, or near major employers can improve liquidity.
• Regulatory shifts. Changes to STR rules or HOA bylaws can alter revenue potential.
• Association health. Underfunded reserves or frequent assessments can degrade returns and affect financing.
• Concentration. A high share of investor-owned units can raise lender concerns and reduce appeal for owner-occupants.

Due diligence checklist

Use this list to organize your review:

• Sales comparables for similar condos by size, location, and amenities.
• Rent comps for long-term leases; for STRs, estimate average daily rate and occupancy using local managers or STR analytics.
• HOA documents: bylaws, rules, budget, reserve study, insurance declarations, and meeting minutes for the last 12–24 months.
• Building inspection and any available reports on structure, roof, mechanicals, plumbing, waterproofing, and elevators.
• Local STR rules, licensing, and applicable taxes; confirm procedures with city or county offices.
• Lender pre-approval specific to the condo project, including owner-occupancy ratios and any project approval requirements.
• Property tax history and current tax schedules from county offices.
• Expert input: a condo-focused broker, property manager, HOA manager or board member, and a condo-experienced lender.

Who a Traverse City condo fits

• You want a low-maintenance home base or second home near downtown, the water, or recreation.
• You plan a long-term rental focused on steady, year-round demand from local employers and residents.
• You’re exploring a short-term rental strategy in a building and location that allow it, and you’re comfortable with seasonal swings.
• You prefer shared amenities and professional exterior maintenance over managing a single-family home.

How Lydia Wiley can help

You deserve guidance that blends hometown insight with elevated, developer-level strategy. As a top local advisor and Director of Sales and Marketing for a leading development firm, Lydia offers early access to boutique downtown condos and pre-construction opportunities, plus practical, deal-ready advice for buyers, sellers, and investors.

Here’s how Lydia supports you:

• Sourcing. Early looks at new downtown and waterfront offerings, plus off-market conversations with local developers.
• Underwriting. Local sales and rent comps, HOA health reviews, and realistic expense modeling for both long-term and short-term strategies.
• Strategy. Clear guidance on project approvals, financing options, rental policies, and 1031 exchanges.
• Team. Introductions to condo-experienced lenders, property managers, and inspectors to streamline due diligence.

Ready to explore Traverse City condos with a trusted advisor by your side? Schedule a private consultation with Lydia Wiley.

FAQs

Can I use a Traverse City condo for short-term rentals?

• Possibly. It depends on city or county rules, your condo association’s bylaws, and your lender’s restrictions. Verify all three before you rely on STR income.

Do HOA fees ruin condo investment returns?

• They can reduce net yield if they are high or rising. Review what the fees cover, the reserve study, and any history of special assessments to understand true cost.

Are condos easier to maintain than houses in this market?

• Often yes for exterior elements, since the HOA handles common areas. You still carry cost risk through fees and assessments, so budget accordingly.

Will a condo appreciate as fast as a single-family home?

• Appreciation varies by location, building quality, and demand. Downtown and waterfront condos can perform differently than broader markets. Use local comps for a grounded view.

What financing hurdles are unique to condos?

• Lenders may require project approval and specific owner-occupancy ratios. Investor loans can need larger down payments, and some programs limit STR use. Confirm early in the process.