What is a condo?
A common problem for house hunters who start researching the real estate market is the high demand for housing in urban and suburban areas. Year after year, the resources, economic opportunities and walkability of these neighborhoods have driven up prices as more people view these communities as ideal settings to buy a home.
The average cost of single-family homes in these markets can fall far beyond a realistic price range for some, driving many to seek out alternative home buying options, like condominiums.
What’s a condo?
A condo is a privately owned residence that is part of a larger complex where members can enjoy the benefits of homeownership without the inflated cost and added hassle of buying a house in the same area. Condo-specific perks like general exterior maintenance and shared communal areas benefit residents with a stress-free but community oriented style of living.
Buyers who might like the advantages of urban living, but can’t afford a mortgage for a single-family home might consider buying a condo as a reasonable solution to your home needs. In addition to providing an opportunity to build equity in a property, condo ownership comes with access to amenities and services provided by the local homeowners association, such as gyms, pools, shared outdoor lawns and general maintenance services.
These rows of attached residences might seem like apartments, but they are actually privately owned homes, granting the title holder all the privileges and benefits that come with homeownership.
What’s the difference between a condo and an apartment?
The biggest difference between condos and apartments is ownership. While apartments are rented out to tenants, condos are owned outright by their occupants with the property title fully transferred over to the buyer.
Ownership is a major advantage in owning a condo vs. renting an apartment. Not only does the property gain value over time, but buyers have the chance to build their own credit while also gaining equity. If you’re ready to treat your home as a long-term investment, moving from an apartment to a condo is an excellent step towards building wealth and achieving financial independence.
Of course, condo ownership does come with additional expenses that are not included in leasing an apartment. In addition to paying property taxes and making a down payment, condo owners are required to pay homeowners association fees, which could be substantial depending on the condo’s offerings and location.
Many condo owners will decide to rent out their properties as apartments to bring in extra revenue. If you’re uncertain whether you’re ready to call a condo home, renting one of these residences could be a great way to try out the lifestyle and see if condo living is right for you.
Homeowners associations & condos
In addition to condos, townhouses and even some single-family home neighborhoods fall under the jurisdiction of a local homeowners association. Homeowners associations (HOAs) are committees, usually composed of local residents, that set the rules and regulations for the community.
Standards around cleanliness, conflict management and the use of shared amenities are set and upheld by HOAs, helping to ensure community members get to enjoy the best aspects of condo ownership. These committees will also manage maintenance initiatives and fund these services through HOA payments and fines.
Community members make scheduled payments to their HOAs. The amount and frequency of these payments depends on the local rules. The amount paid in HOA fees can also vary widely between condo complexes, depending heavily on the services and amenities provided to the residents.
HOAs can also strike penalties against community members for missed payments or infractions. The penalties can range from fees or, in extreme cases, a lien on the property.
Pros & Cons of Condos
While condominiums might be an excellent choice for some, this style of living is not for everyone. Some benefits of condo living can be seen as a disadvantage for others, so it’s important to understand the pros and cons of buying a condo before making your decision.
Pros of buying a condo
- Maintenance services
- Shared spaces & amenities
- Urban & suburban living
- Price point & affordability
Condo owners pay fees to their homeowners association that cover required maintenance for the building and surrounding areas. Most condo associations will handle exterior upkeep, but policies on internal repairs can vary between communities.
Snow removal, waste management and general care for the neighborhood’s communal areas are all maintained without the residents having to lift a finger. Condos can be an appealing option for buyers looking to avoid the physical commitment of preserving a single-family home.
Any repairs required for the inside of the home, such as plumbing or electrical issues, are not usually covered by condo associations. These types of internal issues will usually need to be repaired at the expense of the homeowner.
The costs for these maintenance services are covered by the residents’ payments of condo association fees.
The condo’s homeowners association will decide how those fees are spent and what types of repairs will be covered, leading to large variations on maintenance policy between different condo complexes. While some neighborhoods might offer a variety of services and amenities, most condo associations will only handle upkeep in the area’s shared spaces.
Before deciding on a condo, you should always check with the local condo association to determine if the associated fees are worth the offered services.
Shared spaces & amenities
Houses that come with inground pools and private gyms are typically outside of the average buyer’s price range. Condo complexes, however, will offer a variety of amenities and shared spaces for you and your fellow residents to enjoy.
Thanks to the collective participation of condo communities, communal facilities and outdoor lawns are available to use for anyone who lives there. While some communities may offer more of these amenities than others, all condo complexes fund these shared areas through local homeowners association fees. In addition to covering general maintenance like snow removal and trash collection, complexes with pools or gyms will use HOA payments to keep these spaces functioning and clean, allowing residents to fully enjoy the condo lifestyle.
In addition to exercise and relaxation, condo facilities also provide an opportunity for residents to socialize. These built-in perks give neighbors a chance to connect and help foster a sense of community within the neighborhood.
If you’re looking for a home where you’ll get to know your neighbors, condominiums could be a great choice.
Urban and suburban living
Public transportation, educational resources and better job markets all come along with living close to an urban center. City living offers a wide array of fun and enriching opportunities, which is why housing there can be so expensive.
Getting a foothold in an urban or suburban real estate market can be a challenge for buyers on a strict budget, but condominiums might be a practical alternative. As more complexes are being built in high-demand markets, condos are an increasingly appealing option for anyone who wants to live in the city, but can’t afford the inflated price of a single-family home in the same area.
Price point & affordability
Urban neighborhoods aren’t the only place condo owners can have an upper hand. In the average real estate market, the price of a condo is almost always significantly less than buying a house. While condo owners are burdened with additional homeowners association fees, benefits like lower down payments, taking out a smaller loan and paying less in interest over time make owning a condo much more affordable than buying a home.
Since damage to the building and external maintenance is covered by the condo’s homeowners association, the price of insurance coverage for condominiums is also much lower.
Condo ownership also comes with opportunities as a second home. The privacy and amenities that come along with condo living makes these locations ideal targets for renters. Many condo owners choose to buy the property as an investment and gain some additional income by renting the space.
Renters are not always permitted in condo complexes, so make sure to check the homeowners association’s rental policy before buying a condo.
Cons of buying a condo
- Homeowners association fees
- Reselling the property
- Individualism and design
Homeowners Association Fees
While purchasing a condo is usually a cheaper alternative than buying a home, it does come with the added cost of homeowners association fees. Depending on the location and amenities provided at the complex, these fees can be prohibitive for some buyers.
While they do grant residents with all the perks of living in a condo, these payments can be substantial. Some HOA cover high-cost facilities such as pools or indoor lounges that can be expensive to maintain.
Rising HOA fees are usually outside of the residents control. If the HOA decides to increase the amount of payments, potential buyers might be less willing to move to the area and the property’s resale value can drop.
Reselling the property
Reselling a condo can be difficult. Condos are typically not as high demand as other houses that might be for sale in the same area, while other factors outside of the owners control can also impact the condo’s value.
Homeowners associations can prevent an owner from moving, or institute high fees that make the complex unappealing to buyers. Since units in the same complex are identical, multiple empty condos in the same lot could also drive down demand, making reselling all the more difficult.
Individualism and design
While condos do provide the comforts and privacy of a typical house, they rarely distinguish themselves from other buildings in the complex. Some communities may allow decoration or exterior changes to the building, but those policies are at the discretion of the homeowners association. Major construction projects that impact the exterior appearance of the condo or surrounding area are not likely to be approved.
If individualism and interesting design is an important factor in your home search, condo complexes may not be your best bet.
If you’re in the market to buy a home in a high demand location, condos can provide a path to homeownership without the high cost of single-family homes. Thanks to the services and amenities provided by local homeowners associations, condo complexes offer perks that other housing communities can’t match.
If you think calling a condo home would be a good fit, but are worried about exorbitant HOA fees, you might consider moving to a townhouse instead.
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