The “condominium” (or “condo” for short) is generally seen as the missing link between renting an apartment and owning land with a house. Commonly, at least in my experience, a condominium is an apartment building in which the units are individually owned but the common spaces are jointly owned by all individual owners.
There is one primary advantage in owning a condominium unit above renting: your equity an an asset with a possibility of appreciation. There is also one primary advantage above owning a house and land, the probability of finding a comfortable dwelling for a lower price.
The disadvantages are numerous:
Lifestyle of dwelling. Living in a condominium is much like living in an apartment building. You are close to your neighbors, and no matter how things appear initially, the walls and ceilings are never as thick and sound-proof as they appear to be initially. If I want to hear the children living downstairs screaming at 3:00 in the morning, I’d prefer to stay in an apartment.
Price won’t increase as much as a single-family house. Even when the real estate market is in an upward trend, beneficial to sellers, the price of condominium units won’t increase as much as the price of houses. There seems to be an endless supply of condominiums. Apartment buildings are often converted to condos when the market is favorable to such a move. Houses, and more importantly the land they sit upon, are much more limited in supply. If you own a condominium you own a certain cubic feet of air within your particular enclosure. You do not own the biggest driver for appreciation, the land.
Association fees. The common areas in a condominium are owned jointly and are usually governed by a board of directors or another group of representatives. In addition to your mortgage and taxes, you will also be responsible for association fees. These fees ensure there is enough funding to mow the lawn, fix the roof, insure the owners against liability, and advertise unsold units.
Association rules. Rules vary from one condominium to another, but they are designed to keep the appearance of the buildings professional and uniform. This supposedly keeps property values higher. Don’t expect to be able to paint the outside of your unit in a way that reflects your personality. Your landscaping options are limited. In many cases, you won’t even be allowed to erect a small flag on your door frame or window. Some associations don’t allow pets.
While I reserve the right to change my mind, I’d rather skip “Apartment Living Part 2″ when it’s time for me to “upgrade” my living situation. My intention is not to insult condo owners, it is only to discover what is best for me.
Photo credit: edkohler
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I could not agree more. I lived in a condo for 3 years (rented from a family member) and while I see the benefits of ownership, it was more of a hassle than it was worth. Problems with loud neighbors? You can’t just call the apartment manager. Having to make “group decisions” on everything related to the building began to grate on me as well.
Condo v. home purchase a lot of time is a personal/lifestyle choice as much as a financial choice. I think a lot of the reasons why not to by a condo aren’t necessarily disadvantages for all (understanding the caveat, that “you” will likely never purchase).
Not everyone may see being close to neighbors as being a bad thing. When people are not just temporary tenants, you have more of an opportunity to have a “community” than if were an apartment building, and arguably more than a “house with land” as well. Plus you could equally have the chance of having a “fun” neighbor in a house with land–loud, disrespectful of your land, poor upkeep of their property–but without the recourse of an condo association for potential redress.
Generally, yes, condos do no appreciate as fast as single-family houses. But this is also market-dependent. In many higher-value and higher-density areas, condos appreciate just as fast- if not faster- than single family.
Association fees cut both ways. An additional expense, yes, but not one that you don’t necessarily pay as a single-family owner (maintenance and upkeep, etc). For those that may not want to have to worry about the upkeep of a single-family dwelling, a condo could be a could choice.
And while association rules may limit your ability to express your individuality, they also prevent neighbors from doing the same. You won’t see any lawn gnomes or pink houses in a condo building.
I worked in real estate for so many years, and time and time again, I saw young couples buy condos without considering the price of the condo association dues. These dues are a HUGE financial suck because they often range from $250-$500 for a nice condo building…a month. No, I’m not kidding. Plus? A board of maybe three people who live in the condo can choose to raise them at any time for any reason without the consent of you, the homeowner. Don’t get trapped in that!
It depends where you live, the disadvantages you list aren’t universal except for the lifestyle of dwelling one.
Here in NYC if you want to live in the city and not have to commute you don’t exactly have a choice but prices do increase as much or if not more than single family homes because of location.
As for single family homes the disadvantages apply as well. Back in Reno where I grew up all the newer homes are development communities so you’re forced to join the HOA, pay the dues and follow the rules. Not being able to paint outside the unit or hang a small flag is nothing compared to an HOA fining you for not having your front lawn or backyard landscaped to their liking or your car not being expensive enough to be parked in your own driveway.
If you own a condo… you basically own a piece of AIR. If you own a house, you actually own land. Land will always be more valuable than air.
Yeah, we live in a condo and… none of those really apply. :) But we’re also a special circumstance. We have no HOA, so no dues or community rules (a couple of us got together to pick someone to mow the lawn, but that’s the extent of our organization). We own the land our condo sits on as well as the air above it (important, because our neighborhood’s zoning allows us to build up in the future); our condo is townhouse-style, so no one above or below us. And while we have neighbors on each side, we never hear them – our units are constructed with an air space between each unit to deaden the sound. In 10 months our unit has already appreciated more than our house did after two years by virtue of it’s proximity to downtown and the ability of residents to walk just about anywhere. In the area we wanted to live, we were lucky to get a private garage and not a spot in the basement – if you want a house, you move further out, and your rate of appreciation declines as your commute time increases.
And there are condo perks for us – we’ve met more of our neighbors than we even did in the suburbs. For us personally, we wanted an area of increased population density because resources are being used more efficiently. We didn’t want the maintenance a home requires (our first house had huge HOA dues because they HOA maintained our landscaping and fence). Our utility bills are lower per square foot because the shared walls offer better energy efficiency. We downsized our house by almost 50% because it was important to only use the space we needed and houses don’t seem to come small anymore. And we were able to become a one-car family and only use one 9-gallon tank of gas a month because of our prime location. Different strokes for different folks. :)
The point being – no two properties or regions or situations are alike. Which is also why news stories about a tanking economy and a “buyer’s market” are fairly useless on a national scale.
I had the choice to buy a condo 3 years ago and boy am I glad I didn’t, (partially because my parents told me not to). My house in the depressed Detroit metro area has already lost value, but I’m better off than if I had bought a condo of equivalent square footage, perhaps 8 years newer, and with association fees that I don’t have to worry about. At the time, assocation fees at $200/month would have got me $20K more of mortgage. If I want my house to be maintenance free for me, I can hire sombody to do lawn/garden work for $100 a month, (small yard). My neighborhood is not the nicest, but I have no association looking over my shoulder, I get trees, grass, walls I don’t share, and a two car attached garage. Plus, I’m only a couple of miles from nice a suburban downtown area. I have since moved away for a new job out of town, but my friend is renting my place at least for a year. I don’t know if a condo would have been as easy to rent out either. Lots of condos have stairs galore.
However, given this depressed market and the fact that rents haven’t come down, it might be a decent time to buy a condo as an investment to rent out. It would depend on the association fees and the local economy though.
I have to chime in here, too. While I personally find it unlikely that SomeGal and I would consider moving into a condo, that does not make them a bad choice for everyone.
First, in our part of the country, many condos are basically duplexes, if not fully detached. Many that are attached are well-designed and only the garages touch the adjoining unit.
As far as the association fee, that cuts both ways. Again in our neck, they are typically $50-200/mo on $200-400K condos, and they cover all exterior maintenance including roof, windows, and exterior walls, in addition to lawn and landscaping care. If somebody offered to cover all that on our current single family home for $150/mo, I would likely take them up in a heartbeat. I wonder if those who rant about dues increases stretched their budget so thin that small increases pose serious budget concerns?
As far as rules go, in many parts of the country nicer subdivisions have similar rules. For example, in our nice but not luxurious subdivision, any exterior modification requires HOA approval. This includes planting vegetation, painting, and lighting. Fences along the property line are also forbidden.
Obvious if one considers a high-rise condo in Manhattan the situation above changes drastically.
I live in a condo and I love it. The thought of living in some suburban subdivision makes me shudder. Give me a house on a wooded mountain in the middle of nowhere, or give me a condo in the city where I can get to places without needing a car. And since the former wouldn’t allow me to earn a living or visit much with friends, I’ll take the latter.
If you own a house, you need to pay for external maintenance directly. If you own a condo, you do so through condo-fees. In a well-run condo association, the latter will be more cost-effective. (In a poorly run association, that’s the least of your troubles) If you don’t want to hear kids screaming, then don’t get a condo in a building with a lot of kids. My building has just one-bedroom condos in it. Thus, people with kids have no desire to live here.
If you live in a condo, then you can actually be in an area that’s walkable/livable, rather than one where you need a car to get ANYWHERE. I’ve found that the quality-of-life is much higher when you can go about your daily/weekly business without NEEDING a car. Having tasted the car-free life, I absolutely REFUSE to move back to somewhere where it’s necessary, or nearly so, to own a car. So for me, “Lifestyle” goes in favor of condo.
As for condo association rules– these vary greatly. Definitely something that needs to be gone over with a fine-tooth comb before putting in an offer. I love the way the outside of our building looks, so it doesn’t bother me that none of us can do anything to change the outside of the building without a vote. And I can do whatever I like with the inside of the condo (the one caveat being that structural changes need to be approved by an architect to ensure that I’m not knocking out a load-bearing wall or something.) We have a cat.
The appreciates-less thing doesn’t bother me, because I’d rather live in a place I love and have the value rise less than to live in a place I loathe and have the value rise more. Also, I think that walkable areas are going to increase in demand in coming years. Sure, price of gas will probably go down for the short-term at one point, but in the long-term, the price of a finite resource can only keep going up.
Everyone’s MMV, of course. But all this article tells me is that we have very, very different preferences about where and how we want to live, since none of your reasons make a lot of sense to me.
(And if most people would rather live in a house than a condo, then why are the condos in walkable areas priced the same as houses three times their size in non-walkable areas? I can understand wanting to live in a rural area, and I can understand wanting to live in the city, but I’m unable to comprehend the suburbs, and why some people (very few that I know, but there must be some) actually see the suburbs as desirable.
Another plus for condos: the smaller size. Our 1br gives us plenty of room to work, play, and entertain small groups, but is far easier to furnish, clean, heat, cool, etc than a full-size house (or one of those ungodly McMansions– I’ve never met anyone who would WANT to live in one of those things, but whatever floats your boat, I suppose.)
I hear you, yet I’m still happy I bought my condo ten years ago. First, if there are problems with noisy neighbors, etc., I can call the management company (and yes, I would take it to them and/or call the cops if it was a very loud party or something, but that would be the case with a single-family home as well). And while the fees are cumbersome, so would the maintenance and upkeep on the yard, roof, walkway, and driveway of a house. Yes, I could mow my own lawn, but I’m not handy enough to replace my own roof or windows–money which I would have to save for such things anyway. And yes, there are a lot of rules, but when you think about it, it’s nice to know that people can’t leave all kinds of trash out on their balconies (which my upstairs neighbors did, stinking things up for me) without consequences (they were told to stop and were fined, and lo and behold, it stopped). My sister and brother in law own a house, and there’s a home on their street with overgrown weeds, trash in the yard, etc. It will take forever to have anything done about that.
Also, I couldn’t afford a house, and renting a place costs far more than my mortgage and condo fee combined.
I currently own a home and can’t wait to get out of it. I hate having to keep up with the outside and feeling inferior to my neighbors who are out there trimming their lawn with scissors (yes, they were edging their lawn with scissors). I have been so busy this summer that I haven’t turned on the sprinklers or pulled a single weed. I’m sure the neighbors hate me. I just hate maintenance, period. I hate yardwork too. The only plus is that I have a half acre and my dog can run around in the back (he’s a smaller 20 lb dog).
I have owned homes that have HOA and that was AWFUL. We couldn’t even plant a bush without prior approval, and couldn’t remove one without approval. We had a gardener and we still got fined about once a month for our grass being too long, and one time we got a patch of little white flower weeds and got fined. We couldn’t even park in our driveway!!! We ended up having t measure our SUVs and prove that they wouldn’t fit in the garage. Once I cleaned out the garage for 2 days and parked my little car in the driveway. I got fined. My Mom visited for a week and brought a car…we got fined. It was evil. however, our house also astronomically skyrocketed in value because it was a great neighborhood.
Pluses and cons to everything. Next house will probably be a condo, but a townhouse style. Minimal yard, but still a sense of being separate from the neighbors.
In our area, downtown condos sell for $300/sq. ft and up. The actual cost is higher, if you factor in the condo fees which never stop. The problem is that the developers overpaid for the land and have to jack up the condo prices to make their margins. The other problem has been speculators who drove prices up during “pre-sale” mania. Not for me.
I guess condos aren’t for everyone but I think they’re a great investment. I live in a city and can’t stomach the idea of living in suburban sprawl – especially with gas prices. I want my weekends to be filled with going out and relaxing, not worrying about house maintenance – especially while I am young. My boyfriend is in the process of buying a condo right now.
While I agree on some points (noisy neighbors, annoying association fees), I would still argue that those who cannot afford to purchase a home (or at least want a “nicer” condo) are betting off purchasing a condo rather then renting a condo.
Both my wife and I purchased condos right out of college (prior to when we married). In the 3 years we owned the condos mine appreciated $70K and her’s appreciated $40K. This more then helped with the downpayment of our home when we went to sold. At 22 years old, I had neither the time dedication or the money to purchase a home. We are now MUCH better off having purchased the condos vs renting.
Just my 2 cents
I have to point out that your second point about condo’s not going up in value as much as detached homes is not true in areas where there are nothing but condo’s – namely say…NYC:) I would love to buy a home with land in manhattan, unfortunately something like that starts in the 10’s of millions and there are only a few choices.
In any dense metropolis – even ones that do have houses too (like SF) condo and home prices will be locked together as far as general appreciation goes.
@Twiggers
I could not agree with you more. I bought a single family home thinking I would love it, but not so much. I hate doing maintenance on the yard, bushes, weeds, roof, gutters, the list goes on and on. I am kind of stuck at the moment, but when the market picks back up a bit I am seriously considering moving into a Condo. I found a condo development close to where all my friends live, easily accessable to the city and my job. Plus it has underground parking and a clubhouse with gym, poker tables, etc…I will take the condo fees for all those ammeneties. If you add a gym membership onto hiring someone to upkeep your yard, shovel snow, etc… for you like I do, it makes the fees not so bad. So while I agree with most of this post, there are some positives for people living in a condo. I would trade the equity from the land for a somewhat carefree lifestyle any day.
ITA about the convenience and less need of things like cars, etc. with condos. I’ll also point out that it’s dangerous to treat your home like something you’ll profit from. An article in the Wall Street Journal made the point that the appreciation in a home’s value should be regarded more as a refund for all of the money you pay into it for maintenence, repairs, etc. I own my condo and I don’t regret it–but I pay a mortgage instead of rent because one day, my fifteen year mortgage will be over and I won’t have to pay the mortgage again. I can redo the kitchen if I want to, paint the walls any color I want to, etc. It’s my home. Yes, I’ll pay fees, but as I pointed out before, that money would be out of my pocket towards the maintenance of a single-family home as well.
I really don’t like the idea of homes as money-makers. Sure, it’s nice if the value goes up and you make a pretty penny, as long as you’re moving to a much less expensive area. Otherwise, you’ll be in the same boat as you were, and people just starting out won’t have a chance. That’s what happened where I lived–the bubble grew to the point where people who made decent money and saved still couldn’t afford to buy their own homes (without some ridiculous mortgages, which some people went for and others didn’t). I’m glad I was able to buy when I did–had I waited two years, this condo would have been out of my price range.
Flexo, I totally agree that there are many negatives to condo ownership. But my husband and I got lucky and we love our townhouse (which is technically a condo for insurance purposes). The biggest benefit is that we don’t have to maintain a yard or pool, yet we have beautiful landscaping and a pool and jacuzzi just steps away. Security is also taken care of, along with some maintenance (such as annual termite inspections).
I say we got lucky, because we have fantastic neighbors on both sides who are nice and don’t bother us one bit. And we got lucky because our management company is super responsive and very competent, which I’ve learned isn’t the case everywhere. Also, our monthly HOA fees are very reasonable. We bought several years ago, so the combination of our mortgage payment and HOA fees is less than what we would be paying in rent for a comparable place. I haven’t crunched the numbers but I’d bet that would be the case even if I factored in our condo and earthquake insurance policies.
Condo living might not be for everyone, but I wouldn’t rule it out just yet if I were you. Unless you dream of maintaining a yard.
Thank you very much to everyone who has been sharing their experiences with condominiums. They are a lot more positive than I had expected.
I used to have a house and I now have a condo in a lovely walkable town. I will never own a house again. The maintenance was far too much work for a single woman like me, and the house, at 2600 sq. ft., was too big. I had to take a car everywhere and since I was the only single person in a family neighborhood, I didn’t get to know my neighbors that well. I despise outdoor home maintenance, so that was the deal killer after four miserable years in the house. Now, my heating and cooling bills in my 1000 sq. ft. condo are 15-25% of what they were in my house, and I spend less in maintenance fees than I ever did on the house. Plus, the peace of mind and time I freed up allows me to pursue more satisfying, and potentially money-making, activities. My condo is only several blocks away from the supermarket, farmers market, library, drugstore, restaurants, shopping, and community activites, so I rarely need to take my car out except to get to work. I know all the neighbors on my floor, which is a mix of empty nesters, singles like me, and young married couples. I adore living in a condo and am glad that I finally figured out what was right for ME.
Some people I know sold their homes and bought condos when they retired. Maintenance and upkeep and also security were the main motivators.
I was a single woman when I bought my 850 sq. foot condo in 1997. I came from a house and didn’t relish the idea of doing all the outside maintenance. I bought in a condo development that I had lived in two times previously as a renter – once when I was 17 (I’m 43 now) with my mom and sister and once in 1992 with my then husband. I knew they were well constructed and the association kept the place looking great and well maintained. When I bought, condo dues were $91 a month which included basic cable, water, garbage, sewer, pool maintenance, grounds, roofs, etc. Condo dues are now $223 a month mostly due to the horrific run up in insurance costs due to the 2004 hurricane season in Florida. Our master insurance policy was canceled at least 3 times. My personal homeowners insurance premium per year is $761 and my taxes are $300 a year. I paid off my condo in 8 years so the maintenance is no problem. Since I’ve been there, we’ve only had 1 special assessment and it was for insurance reasons.
It has worked out for me – I bought something I could pay off quickly. Everyone’s situation is different and you just make the best decision you can at the time.
I disagree wholeheartedly with this article. A condo is a great stepping stone toward a house. It is far better than a co-op, because the fees are lower and the restrictions are fewer.
I purchased a condo in order to pay the same in mortgage as I was paying in rent. Sure, the downpayment took time to generate, but when I had it, I was then able to purchase a 2 bedroom, rent out one room, and paid less in mortgage than I was in rent. Once I was married, I lived there for 2 more years and eventually we bought a house. Now we rent out the condo. After 19 years, it’s almost paid off, and the rent far outstrips the monthly payments. In addition, the value is now 3X what I paid for it.
I’ve had my 732 sq. ft. apt-condo since 1988, and I love it. It’s in a very walkable neighborhood, with a bus stop right in front of the complex,and near our little “village” where I can go to a restaurant, take my dry cleaning, or pick up an ice cream cone! While there are some disadvantages, most of my single friend with homes are devoting a whole lot more $ to their real estate and utilities. Best of all, my condo will be paid for by the time I retire. My friends will be carried out on their backs and in boxes by the time, if ever, there houses are paid for. Worse, because many of them are “house broke”, they’re not able to save very much toward retirement. Beware of buying a home for investment; you may wind up with anything but.
The value of a condo is partly related to it’s whereabouts. … as others have stated.
In my area, if you want to truly live *downtown*, you must buy a condo… and you pay dearly.
You can only build so many condos downtown, so they are limited in supply keeping their value up.
They offer a great lifestyle, no parking problems, and the ability to use the car less often.
If you are talking about joe-blow condos that are scattered around town, then I agree that they are questionable.
Another value of condos is that utilities are lower. Your neighbors act as insulators! I have noticed this when I lived in an apartment… much lower utilities.
This offsets some of the condo fees.
I would also bet that home ownership is FAR more expensive in terms of maintenance as well. I live in a small home, and yet I pay far more in utilities and home maintenance than someone might for a condo fee… so that condo fee is probably cheaper…. and maybe quite a bit cheaper!
Consider the price and maintenance of all your home/garden equipment!… and then the labor of actually using the darn things on hot sticky summer days. Lovely. Then consider having to pay the handyman for various things.
Imagine being able to spend your time engaging in activities of your own choosing rather than having your home dictate what you will do: mow the lawn! clean my gutter! fix my siding! Get those weeds! Remove the dead tree!
So condos may be a great value AND time saver!
If downtown condos drop in price, I’m all over it.
I had a beautiful condo in California and sold it back in 2003. Bought a house in Vegas and it is my biggest regret in life! I hate it! Not only did I increase my stress level living in the house, but my expenses. Living in the condo was cheaper. I regret this move every single day of my life!!! Now that I can’t sell the house because the value dropped so much…
I feel so hopeless! Not a nice way to live. :(
Condo living is about lifestyle. If you are childless and want to live in the city a condo is great. If you want to live in a house in the burbs, have a yard and a garage then condo dwelling is probably not for you. To say that a condo does not appreciate is ludicrous. If you buy a condo in a desirable area, especially in a urban location, you can see a great return on your investment if you time your buy right. I am looking at owning a condo in a brand new high rise building in a great urban location and can’t wait to walk out my door and have all that the city offers at my finger tips. Not to mention zero commute and a world class mass transit system. In many cities, even regular old houses have HOA dues and rules attached to them. I’ll leave the suburbs for boring families!
I think it depends on the area where you’re living. If you live in a very expensive and popular urban area like me, condos are a great option. They still appreciate like crazy, and people seem to forget that HOAs actually cover expenses that you’d be paying for out of pocket in a single family dwelling (water, garbage, exterior maintenance, etc…)
I have owned a single family home and am considering a condo. A condo would allow me to live in a much more interesting, edgy part of town where I could not afford to buy a house. The house was great, but it cost a mint to heat it, etc. I think that the bills we paid were larger than the HOAs I expect to pay.
That said, it is all a question of the lifestyle you want. I like both arrangements for different reasons. If you don’t live in New York, The Bay Area, etc, buying a single family home probably makes more sense.
Assoc dues at our building do not pay forsomeone else to sell a unit. That is paid buy the seller.
It pays for heat, cable, water, garbage,everything except phone and electric. Nice. way less work (staff do that) more time for vacation! Unit safe while we are gone too!
Well, I have the pleasure of having the best of both worlds. We recently moved in a 2200 sq ft. single family condo. It’s the new wave in the area, I have no one above or below and I have only one house on the side but it’s detached and I have about 20 ft before I am in my neighbor’s yard. I love my condo and I hate yard work so the fact that my condo association fees cover that makes it a plus! If I had to live with someone above, below, and on both sides of me, I probably would not have purchased my condo. I guess it just depends on what works for you.
condo buyer beware, you should check out the declaration, and laws governing the property in the state you wish to purchase. Many complaints arise out of malfunctioning condo boards. Attend all meetings, and record them, for verification of the minutes. Pay fees, and assessments then argue disagreements to avoid eviction, and or liens leading to forclosure to your condo. know whether ay rules or regulations violate your rights. Only a close watch and active participation of all members will help to keep a condo board in check. Avoid condos where participation of unit owners is low. The law gives a lot of power to the board, and abuse of those powers can and does happen.
I have a question about your condo, if the roof leaks into your condo and the one next to yours who pays for the roof. And if one of you don't want to pay for it or cant, what happens? Thanks
Ok .. I know my post is a tad bit late … but a Condominium is not a type or style of dwelling …. it is a type of ownership … Although, most people think of apartment style housing as Condo’s … a Condo CAN be a single family house …
Condominiums have shared common areas called common elements. Maintenance fees are charged monthly to the condominiums’ residents.