There are many pros and cons of buying a condo.
Deciding whether to buy a condo or another type of property comes down to your lifestyle, preferences and budget. We break down the different factors to help you decide.
What is a condo?
Condos are single units within larger buildings that contain multiple units. You only own your unit. You do not own the land on which the unit is built.
Unit-only ownership is one of the key ways in which condo ownership differs from ownership of other attached dwellings, such as townhouses. In a townhouse, you own the property on which the townhouse sits plus the townhouse itself. With a condo, you simply own a piece of the building in which you live.
That doesn’t mean you’ll lack access to outdoor space, though. Many condos feature patios and balconies included with individual units. Your condo community may also provide shared access to green spaces, pools, gyms and other community amenities.
In a condo, you are responsible only for maintaining your unit. A homeowners association (HOA) is responsible for the maintenance of the building plus any common areas and community grounds.
Are condos cheaper than other types of properties?
Condos can be cheaper than other types of properties.
They are often cheaper than single-family homes for two reasons. First, owners of single-family homes own the land on which the home sits, along with any yard or acreage that is included in the property. The selling price includes the land as well as the dwelling, which often puts the price point above that of a condo. Second, condos usually cover less square footage than single-family homes do, and real estate prices reflect the amount of square footage in a dwelling.
Condos can also be cheaper than townhouses for similar reasons. Townhouse owners own the land and the townhouse property may include a yard. Therefore, townhouse prices reflect that. Townhouses are usually smaller than single-family houses but can be larger than condos. If they are, the square footage is reflected in the price.
Condo owners often pay a monthly fee to the HOA to cover the cost of maintaining the common areas, amenities and grounds. As a result, prospective condo owners need to factor in the HOA charges when they assess the relative cost of buying a condo unit versus another type of dwelling. Lenders take HOA charges into account when determining your home loan eligibility and how much you can borrow.
But HOA fees aren’t exclusive to condo communities. Townhouses and single-family homes can also be part of HOAs and therefore subject to monthly HOA fees as well.
Having said all of that, condo prices and fees vary based on where you live. In popular cities and neighborhoods, new condos with lots of amenities could be priced similarly to single-family homes.
8 pros and cons of buying a condo
Let’s look at what factors you should consider when deciding whether to buy a condo.
Pros of buying a condo
Buying a condo can be more affordable than a single-family home or townhouse since you’re only buying the unit in which you’ll live, rather than the unit plus the property.
Fewer maintenance responsibilities
As a condo owner, you are only responsible only for maintaining the space within your unit. This can save busy condo owners both money and time. You’ll never need to buy a lawn mower or a snow shovel when you live in a condo.
Condo developments often (though not always) include amenities such as swimming pools, gyms and hiking trails. Some condo communities in upscale neighborhoods are also located within walking distance of restaurants, coffee shops, entertainment and public transportation.
If you are thinking of renting out your home for income at some point, renters often find condos attractive because of their cost and the amenities.
Cons of buying a condo
Less privacy than other housing options.
Condo developments are similar to apartment buildings, with neighbors next door, across the hall and possibly above or below your unit.
Limited personal outdoor space
While you may have a patio or balcony, you will not own a private yard space to plant a garden or play with kids or pets.
HOA rules and regulations might limit flexibility
Condo residents must abide by their HOA’s rules and regulations. These can be wide-ranging rules, and can include limiting or banning pets and limiting or specifying exterior decor. Some HOAs may also impose limits on the percentage of renters in a development as well, making it more challenging to rent the unit for income.
Appreciation might be less than other housing types
Condos can register smaller price increases than single-family homes, primarily because you do not own the land.
A note on condo appreciation
Condos have a reputation of appreciating less than single-family homes and townhouses, largely because condo owners don’t own land, which is a big part of price appreciation.
That said, though, the value of condos depends very much on demand, and demand can vary by location. For example, condos marketed to young professionals in hot spots or empty nesters in retirement areas may experience strong demand and appreciate very well.
It’s a good idea to research the price history of condos in the area in which you’re interested in buying.
The bottom line of buying a condo
Is a condo for you? It can be if you want to enter the housing market at a lower price point than a single-family home, or you want to own a home without needing to worry about extensive maintenance and lawn care. Condos have both advantages and disadvantages, though, so be sure to weigh both carefully before making a decision.
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If you’re interested in learning more about your options, connect with us today.
The information in this article is distributed for educational purposes only. The information is not guaranteed to be accurate and may not entirely represent the opinions of Fairway Independent Mortgage Corporation.
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