Condos: Everything You Need To Know
Condo life comes with its advantages. From community living to walkable urban areas, condominiums are an excellent choice for first-time home buyers and people hoping to enjoy homeownership without extensive upkeep.
In this article, we will discuss the pros and cons of buying a condo, the different types of condos you may come across, and the main differences between a condominium, a townhome, an apartment, and a single-family home.
What Is a Condominium?
A condominium is a large property complex made up of individual units, each of which is owned separately. Ownership typically includes a nonexclusive interest in some "community property" controlled by the condominium management.
Condominium management usually consists of a board of unit owners who supervise daily operations such as lawn maintenance and snow removal.
How a Condominium Works
Living in a condo can be described as owning the air space of a unit in a multi-level building. As this description indicates, the condo owner's title to the property does not include the four walls that separate their unit from other units or common areas. The floor, ceiling, stairwells, sidewalks, and exterior spaces all belong to the condominium association.
An example of a condominium is a residential high-rise that houses multiple families. However, the concept does not apply only to high-rise buildings or residential properties. Residential townhouses are sometimes converted into condominiums, and the same concept can also apply to commercial properties such as office condominiums.
Should You Buy A Condominium?
Those looking to buy a condo will want to consider all relevant factors before making a purchase, including whether you intend to use the condo as your primary residence or as an investment property .
Buying A Condo For Your Primary Residence
If you have determined that a condo is the best type of home for you, you have two options: rent or buy. Calculating your budget and finances will help you decide whether renting or buying is the better option, but there are other factors to consider.
When you buy, you get the benefit of earning equity , and you will be able to live in a place that is truly yours. However, if you decide to become a homeowner, be prepared for unexpected costs and the additional responsibility of keeping up with home maintenance.
Buying A Condo As An Investment Property
Real estate investors often purchase condos for rental purposes. Condos can be a good investment for those looking to enter the investment space because they are generally more affordable. However, those considering buying a condo as an investment property should first weigh the drawbacks and benefits of investing in real estate.
Pros Of Buying A Condo
The benefits of purchasing a condo over renting or owning a single-family home include property ownership with added amenities, reduced maintenance, and affordability. Condominiums are excellent choices for many people.
Empty nesters looking to downsize and seniors who prefer less maintenance might consider buying a condo. A condominium may also be an appropriate option for first-time home buyers seeking a starter home in an urban area where stand-alone homes are expensive.
Here are some pros to consider:
- Added amenities : Depending on the complex, you may have access to amenities like a swimming pool, dog park, or parking garages. In most cases, the homeowners association (HOA) maintains these shared amenities, so you do not have to worry about them yourself.
- Less maintenance : Condos are popular among those who want the freedom of owning their home without having the hassle of maintaining it. If you like owning your place while not having to mow a lawn, shovel snow, or repair a roof, a condo might be a great option.
- More affordable : Condos are typically less expensive than traditional homes and are great for first-time home buyers with modest salaries. Even though you have to factor in condo association fees, a condo can be more affordable than a freestanding house. If you have previously disregarded homeownership because of the high cost of entry, perhaps a condo would be more affordable for you.
Cons Of Buying A Condo
Like any home purchase, there are factors to consider when purchasing a condo. If you do not want to pay additional costs on top of your mortgage or abide by community rules, condo living might not be for you.
Let us further define the cons:
- HOA restrictions and fees: When you buy into a complex development, you must also abide by the rules set by the HOA. These rules may include rental limitations and pet restrictions. You will also have to pay a monthly HOA fee for the upkeep of the common areas and building. These fees can vary widely depending on the size and location of the condo.
- Less square footage: Large families or people whose well-being at home comes from outdoor space may feel cramped in a condo. Condo units tend to lack private outdoor spaces, and you might have to walk a fair distance to find a park or playground.
- Less privacy: Condos share walls and common areas. In this shared space, there is a sense of community but also a lack of privacy. Shared space may have noise problems, and your HOA may limit how long guests can stay.
The pros and cons of buying a condo will differ based on the type of condominium and its location, the size of the complex, and the type of tenant.
Condos and apartments may seem interchangeable but there is quite a bit of difference between the two. Basically, you rent an apartment and buy a condo – which you can also rent.
There are some differences between condominium developers in how they provide garages and parking spaces to unit owners. In some developments, these spaces serve as limited common areas, and the condo association maintains ownership but gives exclusive rights to the unit owner to use the space or garage.
In other developments, the unit owner owns the garage or parking space and also has ownership over it. However, the covenants, conditions, and restrictions imposed on the property may still limit the owner's ability to sell or rent the space independent of the unit itself.
Condominium vs. Apartment
The main difference between a condo and an apartment is that you typically own a condominium and rent an apartment. Apartment buildings usually belong to a single owner such as a property management company, and the building is purely for rental purposes. However, there are times when condominiums rented out to tenants are referred to as apartments.
Thus, it is easy to conclude that the only significant difference between a condominium and an apartment is the ownership. Generally, a condo is something you own, whereas an apartment is something you rent.
Requirements for a Condominium
The declaration of covenants, conditions, and restrictions is a legal document that sets out the rules and regulations that apply to owners of units in a condominium. The purpose of this document is to define the acceptable use of the unit. It describes how the owner uses limited common areas and general common areas. The declaration includes rules for selecting the board of the homeowners' association which is responsible for managing the development.
A unit owner also pays condominium fees to the condominium association. In general, these fees include the cost of insuring the building, shared utilities, and a reserve of funds for the future maintenance of the building. It may also cover the amount that the association pays to a management company for the daily operation of the development. Condo fees are subject to increase. If the building requires extensive maintenance, the unit owners might be responsible for any costs not covered by reserve funds.
Types Of Condos
Let us explore six different types of condos and how ownership varies.
The standard condo home is a residential property in which the owner only owns the portion of the building that consists of the interior of the home. It is in contrast to a single-family residence, or what you might traditionally think of as a “house,” where the owner owns both the dwelling and the property on which it sits.
A timeshare condo, or condo share, is commonly used as a second home or vacation home. Its tenants have access to the condo for a specific time and number of days each year.
Condo shares usually have fees like maintenance and property taxes and aren’t considered investment properties. These types of units can be challenging for the seller, but they offer vacation properties in desirable locations at a fraction of the price of resorts or hotels.
Detached condos provide the benefits of condominium living with minimal upkeep and planned communities within an HOA. The main difference between these types of condos and condo homes is the lack of shared walls. Instead, a detached condo community is near cities, and its units tend to be clustered together.
Private Condo Or Private-Owned Apartment
A private condo, also known as a private-owned apartment, is owned by its respective unit’s landlord. Condos of this type are usually rented to tenants, but they differ from apartments in many ways. Application procedures, criteria, and deposits may vary with these types of rental condos.
The condo building refers to a complex that consists of individually owned units. Typically, an HOA or a community property management, which maintains the property upkeep and some maintenance, controls the ownership of a condo building.
Freehold condominium developments indicate that the developer owns the land the units occupy. Once a tenant buys the condo, it becomes their property. The main difference between freehold condo developments and traditional condo buildings is that owners are responsible for the upkeep and maintenance of their units including exterior walls, while management maintains common areas.
Are Condos Cheaper Than Houses?
With all things equal, condos are usually less expensive than houses. A condo owner pays an association fee that covers maintenance costs, amenities, and other resources. These fees are generally less than the costs of maintaining a house. However, some condos, especially luxury condos in affluent areas, can cost much more than the average house.
The Bottom Line
A condo or condominium is an individually owned residential unit in a complex or building of like units. Condo owners own their units but share amenities, common spaces, and other resources. They pay condo fees, which cover maintenance costs, amenities, and the upkeep of common areas. If significant repairs are needed, and condo association fees are insufficient to cover those costs, condo owners will have to pay a special assessment.
Considering the added fees, owning a condo is generally more affordable than owning a house. Condo ownership has both advantages and disadvantages. Therefore, it is essential to understand the implications before deciding to purchase one.
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