Consider your needs as well as fees, association rules and mortgage rates before committing to condo ownership.
A condominium is a home, generally found within another group of housing units. Condos may somewhat resemble apartments in that they're close to each other, sometimes adjacent or above another unit.
If you're thinking of buying a new home, you may be considering a condominium, or condo. You may have heard that it's basically a house – but without all of the homeowner maintenance headaches. What's not to love?
Unfortunately, there are condo characteristics you may not love. But there are also a lot of advantages to owning a condo, which is why it's been a popular way to live since the first one was built in New York City in 1881. According to the book, "High Life: Condo Living in the Suburban Century," by Matthew Lasner, the first condominium had eight units and was built for city residents who didn't want to be renters but also couldn't afford to buy a house.
That is still often why people buy condos, but there are other benefits. So we come not to bury or praise the condo but to help you answer the question: Should I buy a condo?
The answer is a definite maybe.
"Like any real estate purchase, the decision to buy a condo is often property-specific. There are countless examples of homeowners who are very pleased with their decision to buy a condo, just as many regret the decision, with many more countless opinions in between," says Brady Miller, a chartered financial analyst and CEO of Trelora.com, a Denver-based online real estate brokerage.
Really, whether a condo is a good or bad choice for you will probably depend on how you feel about the pros and cons of condo living.
What Is a Condo?
For those who don't know, a condominium is a home, generally found within another group of housing units. Condos may somewhat resemble apartments in that they're close to each other, sometimes adjacent or above another unit.
Apartment vs. Condo: What's the Difference?
If a condo is next to another condo, in a group of condos, what's the difference between a condominium and an apartment complex?
There are a few subtle distinctions:
Condos have more space. Generally they do, though it isn't as though there's a rule dictating the space of condos and apartments. Surely you'll find some luxury apartments that have more space than condos. But generally, a condominium is more spacious than an apartment.
Condos have more amenities. Again, this is generally true, though not always. While many condominium communities have swimming pools, tennis courts and fitness centers, plenty of upscale apartment complexes have luxurious amenities too.
Condos are an investment. This is the big differentiator. With a condo, you buy and sell the property. Unless you sublet, you'll virtually never make a profit off of an apartment – you're strictly renting it and not investing in it. With a condo, you pay the mortgage and related expenses, but as the years go on, the property should go up in value.
Is It Better to Own or Rent a Condo?
Only you can answer that question. If you like a condominium community, some owners do rent out their units and you could rent a condo instead of buying. The main advantage is that you won't have the hassle of selling the condo later. The main disadvantage is that, as with any rental, you're spending money with no chance of getting some or all of it back in a future sale.
Is It Better to Own a House or a Condo?
That's the main question everybody asks. Again, it's really up to you and what you think. Let's run through the pros and cons of condo ownership.
The Pros of Condo Ownership
Condos are typically cheaper than homes. According to the National Association of Realtors, in December 2020, the median price for a detached single-family home was $314,300 while condos were fetching $272,200.
In a city with a high cost of living, less expensive property can be a major selling point.
Geoffrey Frid is a luxury real estate broker in Beverly Hills, California, who sells condos and lives in one.
"I'm a big believer in condominiums as a whole," he says. "They allow for first-time homeowners, young couples and even the retired to all live in a unit within a structured building that usually encompasses a gym, pool and various other amenities including but not limited to doormen, valet parking and more."
You don't have to mow your lawn. You'll want to take your cues from the condominium community you're moving into and not treat this article as gospel. But generally you're going to pay a fee and maybe two fees – a condominium fee or a homeowners association fee, or both. These fees generally go toward maintenance costs, such as having your lawn mowed or your roof repaired.
Often you'll pay one fee that goes toward taking care of your home (the condo fee) and another fee (the homeowners assocation fee) that covers the maintenance of common areas shared by other condo owners such as trash collection and swimming pool cleaning. Condo fees can be relatively cheap (think: $75) or eye-popping (think: $1,000). It all depends on the condo community and the part of the country you live in.
Those monthly fees may be annoying, but many people love the idea of not having to worry about mowing their lawn or shoveling their driveway.
The Cons of Condo Ownership
Condominiums have a history of being hard to sell. Fair or not, that's the reputation.
Still, "while selling a condo can be tricky, that is not always the case," Miller says. "The complexity in selling a condo is related to the rules of the local HOA, the condition of the broader community and the financial strength of the community."
Jesse Sheldon, director of operations for the Gordy Marks Real Estate Team in Kirkland, Washington, says he tried to sell his own condo earlier this year and wasn't able to find a buyer, "even in the overall great market we are in."
The big problem for condos lately, according to Sheldon, has been – you guessed it – the ever-present pandemic. "Condos have not done really well since COVID started," he says.
Randi Goodman, a real estate broker with Harvey Kalles Real Estate Ltd. Brokerage in Toronto, Ontario, agrees. She says that especially when the pandemic began, "people were looking to expand their space and not be in a small, confined space as most condos are."
The fees can be a deal-breaker. Condo fees and HOA fees can be steep on top of a mortgage and may feel like paying rent.
Still, Frid says it generally comes down to whether the condominium and its community are wonderful places to live or not so much.
"The ones that are tough to sell and sit on the market are those with exorbitant HOA fees, likely have more than a few units for sale at a time, inferior locations and are lacking the amenities," Frid says.
But if you're truly excited to buy a condo and believe you're making a wise decision, future sellers will probably be happy to move into your condo someday.
And if you do have trouble selling it, maybe your condo will still pay off for you. Sheldon says that when he struggled to sell his condo, he found a way to make money anyway.
"I turned it into my first rental property, so it has still worked out for me," he says. "It has appreciated more than when I tried to sell it before, so I will still get a great return."