Buying a Condo vs. a House: Which Is Better?

The Pros and Cons of Two Types of Homeownership

Smiling couple looking kitchen in their new house
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Aspiring homeowners might gravitate to condominiums over houses. They offer less upkeep, look more modern, and seem to be more affordable. However, if you're looking for value down the road, a house might work out better. Condos also demand certain sacrifices from you when it comes to everyday life.

Key Takeaways

  • Condominiums have multiple adjoined housing units that can offer many amenities and luxuries.
  • Condos have fewer maintenance costs but more fees and very close neighbors.
  • Houses generally increase in value over time as long as they are maintained, while condos do not.

Defining a Condo

Condos are private residential units within multi-unit 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 residents frequently share common areas and amenities like yards, swimming pools, laundry rooms, or garages.

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 allow or disallow vary from state to state; however, they all must abide by federal housing regulations such as the Fair Housing Act or the Servicemembers Civil Relief Act. Review your state's laws to determine what might be different where you live.

Some condos are part of buildings or communities constructed specifically for that purpose. Others might be converted from rental apartments or might be renovations to a previously built industrial or commercial space.

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 essential 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 adjust 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 amenities like an on-site health club, you might be saving money in areas that would be separate monthly expenses if you buy a house.

Pros and Cons of Buying Condos

Pros
    • State-of-the-art features
    • Luxurious facilities, features, and grounds
    • Security
    • Concierge services
    • Less maintenance and upkeep
Cons
    • Too close to your neighbors
    • Rising condo fees
    • The Big Brother aspect
    • Less spacious

Pros Explained

  • 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 features.
  • 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 doorkeepers 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 Explained

  • Closeness: Sounds and smells can travel through adjoining walls.
  • Condo fees: If the building is older, it could require more reserves to pay for roofing, plumbing, and exterior maintenance, which means higher fees and occasional property assessments.
  • Big Brother: 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 low price, that might affect your market value.

Some condos will not qualify for FHA loans if the entire community has not completed a Department of Housing and Urban Development review and approval process. However, 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.

Frequently Asked Questions (FAQs)

How much is the property tax on a condo vs. a private house?

Condo owners may save on property taxes over private homeowners, but that isn't guaranteed. For example, in California, the largest component of most people's property tax is a 1% assessment of total property value. Condos might have a lower value relative to private homes in the same neighborhood, but a condo in Los Angeles may cost more than a private home in a small town.

How much cheaper is homeowners insurance for a condo vs. a house?

Condo owners don't use homeowners insurance. Instead, they use condo insurance. Condo insurance tightly focuses on the dwelling unit, and it doesn't offer as much structural coverage for the building beyond the condo. That makes it cheaper than homeowners insurance, but many other variables determine exactly how much cheaper it is.

Article Sources

  1. Homeowners Protection Bureau. "Understand How Federal Laws Affect HOA Functions."

  2. Department of Housing and Urban Development. "Condominiums Help."

  3. California Legislative Analyst's Office. "Understanding California's Property Taxes."