Condos vs. Houses: Which Is Better to Buy?
The Pros and Cons of Two Types of Homeownership
Aspiring homeowners might gravitate to condominiums over houses when they offer less upkeep, look more modern, and seem to be more affordable. However, the economics of houses may work out better, especially when it comes to selling down the road. Condos also demand certain accommodations when it comes to everyday life.
Defining a Condo
Condos are private residential units within multiunit buildings, projects, or communities. Residences often share walls similar to apartment units, but they also can be semidetached, like townhouses, or even fully detached. The residences frequently share common areas, facilities, and amenities, both external (yards, swimming pools) and internal (laundry rooms, garages).
Some condos are part of buildings or communities constructed specifically for that purpose, while others might be converted from rental apartments or be the result of renovations to previously constructed industrial or commercial space.
Condominium associations play a significant role in the lives of most condo owners. An association, run by a board of directors, maintains the common areas, services, and amenities, and is comparable to a neighborhood homeowners association (HOA). Condo owners pay regular monthly or quarterly fees to their associations.
Laws governing what condo associations can charge and what they can allow or disallow vary from state to state, but they all must abide by federal housing regulations such as the Fair Housing Act or the Servicemembers Civil Relief Act. Review the laws of the state where you live to be sure what might be different where you live.
Comparing Condo and House Prices
A fair cost comparison considers the amount of a condo's association fees upfront and adds that sum to the total cost of the house or condo. For example, an association fee of $250 monthly is comparable to an additional $50,000 on a 30-year mortgage with a 4.5% interest rate. That extra $50,000, with those terms, would add $253.34 to a mortgage payment.
Such fees are important to calculate when establishing your budget for a new home. In this example, if you can afford the payments on a $300,000 mortgage, you need to reduce your budget by $50,000 to afford the monthly association dues.
Much depends on the amenities the condo association covers, however. If your fee pays for vital services such as water and trash collection, or for amenities like an on-site health club, you might be saving money in areas that would be separate monthly expenses were you to buy a house.
Pros of Buying Condos
Several lifestyle-related advantages come with owning a condo.
- State-of-the-art features: If you have your heart set on granite counters, stainless appliances, and an open floor plan, newer condos often boast such amenities.
- Luxurious facilities, features, and grounds: Spas, clubhouses, barbecue areas, tennis courts, jogging trails, and recreation rooms are among the amenities condos offer residents.
- Security: In addition to having neighbors close by, complexes often are gated or staffed with guards.
- Concierge services: Many condo complexes have doormen and desk people, along with custodial staff.
- Less maintenance and upkeep: No mowing lawns, raking leaves or replacing broken windows. You are generally responsible only for your interior.
Cons of Buying Condos
The downsides to condos are things often characteristic of apartment life or communal living.
- Too close to your neighbors: Sounds and smells can travel through adjoining walls.
- Rising condo fees: If the building is older, it could require more reserves to pay for roofing, plumbing, and exterior maintenance, which tends to mean higher fees and sometimes special assessments.
- The Big Brother aspect: Conforming to association rules is not for everyone. For example, rules might restrict the number and types of pets you can have or where you can smoke.
- Less spacious: The interiors of upscale condos certainly can be comparable to many homes, but outdoor space typically is limited because of the density of the community. You likely won't have room for a private garden or a private driveway where you can wash your car.
Selling a Condo
Look to the future and the entire condo community when considering the marketability of your unit when you wish to move on. Your unit will never be worth more than an identical unit, plus upgrades. If another owner sells at a cheap price, that might affect your market value.
Some condos will not qualify for FHA loans if the entire community has not successfully completed a Department of Housing and Urban Development review and approval process. Individual units can be approved in unapproved complexes if they meet certain conditions. Be sure to check the status of the community where you are buying or selling.
, usually, because the occupancy percentage of owners vs. tenants exceeds 50%. As a result, a purchaser would need to pay cash or obtain a conventional loan or mortgage. This restriction could affect the number of available buyers when it comes time for you to sell.