Every day, people consider whether buying a condo, single-family house or renting an apartment best serves their interests. The importance of weighing lifestyle and a savvy investment strategy is just the top-line issue of this major decision. Rather than work off instinct, comparing a condo vs apartment and condo vs house may clarify which direction achieves your unique goals. An increased number of people prefer to buy a condo after conducting their due diligence.
A condominium is a property that is part of a larger whole. The condominium may be an apartment with several apartments on the same floor, a townhouse, or even a detached, free-standing home. While the style of the property may be different, they are all part of the larger condominium project.
Many homebuyers select condo living communities because the lifestyle allows them to enjoy the space and grounds free of worry. Condo owners pay a fee to have professionals maintain lawns, gardens, common areas and make certain repairs. In essence, condo buyers pay a monthly or annual fee to improve the quality of their leisure time.
Each unit in the project is subject to the Master Deed, the Condominium Trust, and the by-laws. While many homebuyers choose a condominium to reduce the maintenance chores associated with a single-family, it is important to carefully read all of the condominium documents to understand the rules and clearly understand the individual maintenance responsibilities and collective maintenance responsibilities.
The condominium will have an elected Board of Trustees (Board), in smaller projects, all unit owners may be on the Board. In larger projects, the unit owners will elect owners to the Board. Each owner has a proportionate vote based on their ownership of the project. The Board will meet annually, review the financial status of the condominium, discuss regular maintenance and any unplanned maintenance to be performed (e.g., roof repair). Based on the expected expenses of maintaining the project, they’ll set a budget. Each owner will be assessed an annual fee, collected monthly or quarterly, depending on the complexity of the budget. This assessment is commonly called a homeowner’s association fee (HOA fee). Each owner’s portion is based on the percentage of ownership in the project as a whole.
Condo owners pay a type of dues, sometimes called a “condo fee” or “HOA fee” (Homeowners Association). A board or property management company oversees the upkeep and maintenance of the property, and owners need only call when jointly-owned assets require repair. While a condo provides a wide range of benefits, potential buyers need to conduct some due diligence about fee structures. Standard monthly HOA costs could be only part of the equation.
Purchasing a condo makes you a member of a close-knit homeowners’ association. Members are subject to guidelines set by the association, and members also determine the costs required for upkeep and future projects. As a newly-minted member, you can anticipate fees will be assessed to cover the roads, common areas, landscaping, and repairs of association-owned assets, among others. It may be worthwhile to understand these fees by breaking them into the following two categories — recurring and seasonal fees.
Recurring fees typically relate to wide-reaching expenses that include everything from sewers to legal fees to vendors and taxes. They cover monthly expenses considered necessary for a well-functioning community. It’s not uncommon for members to include additional funds in a reserve account for unanticipated expenses. Depending on the property’s location, seasonal fees are collected to cover costs associated with snow plowing, garden replanting, fertilizer, and leaf removal, among others. These expenses may not reoccur every month or year, but they can be anticipated and budgeted.
People interested in a condo would be well-served to drill down on items not covered by monthly fees. For example, detached condominium communities may require individuals to pay out-of-pocket for roof repairs. HOA boards may periodically approve major upgrades that call for a special assessment fee. Although members generally share these expenses equally, people on tight budgets could find them challenging. The good news is that many HOAs set aside a percentage of monthly collected payments for these and other purposes.
When weighing the condo vs apartment differences, it would be an understatement to say they are worlds apart. The critical difference stems from the fact apartment dwellers have zero ownership interest in the property. Median rent prices for a Boston-Cambridge Metro Area two-bedroom apartment increased from $1,894 in 2018 to more than $2,400, in 2021 according to rentdata.org. All the money goes to the property owners for simply living in the space.
By contrast, each time a condo owner makes a monthly mortgage payment, their equity in the property increases. The financial difference between a condo vs an apartment is that condo owners invest in ownership and improved resale value vs handing over a portion of their hard-earned salary to their landlord.
In terms of lifestyle benefits, an increased number of apartment complexes have improved common areas and amenities, but few measure up to those of an HOA. Apartment renters usually rely on the landlord to decide whether to improve a common area or cut the lawn regularly. Condo owners enjoy decision-making power.
The condo vs house debate raises substantial questions for potential buyers. Purchasing a single-family house often represents the single largest investment of a person’s life. Single-family homeowners generally see increased property values that outpace condos. In all fairness, a condo gains value without the owner having to hire contractors to make most repairs or spend weekends doing yard work.
Living in a condo means buyers often have neighbors in the same building or detached units nearby with shared grounds. Single-family homeowners pay taxes and usually have abutters. In many ways, the condo vs house debate is like comparing apples and oranges, primarily because they have different expense structures. Potential buyers concerned about ongoing expenses and return on investment would be wise to create a spreadsheet that includes all the costs, including rising property taxes.
If buying a condo appears to be in your best interest, it’s crucial to understand as much about how they work as possible. This tasks buyers with gathering pertinent information and asking questions. The following may prove helpful in getting a firm grasp of what condominium life entails.
If you feel satisfied that buying a condo fits your financial and lifestyle needs, the next step involves contacting a lender with experience in this area.
If you are considering buying a condo, working with a lender specializing in condos financing can save you time and money. A condo loan expert possesses the experience to review the condo insurance policies, Master Deed, Condominium Trust, by-laws, and other related documents and will know how to avoid unnecessary closing delays. At Middlesex Federal Savings, our experienced lenders understand the ins and outs of condominium financing and can help you save money and time by avoiding unnecessary closing delays.
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This content is provided for general informational purposes only and does not constitute financial, investment, tax, legal, or accounting advice. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this information should consult with a financial professional. The information contained in these articles was obtained from sources believed to be reliable and accurate at the time of publishing. We do not represent that it is accurate or complete, and it should not be relied upon as such. All opinions and estimates expressed in this article are as of publication date unless otherwise indicated, and are subject to change.