The Pros And Cons Of Buying A Condo
/Before we dive deeper into the pros and cons of buying a condo, let’s get on the same page as to what exactly is a condo. I had always thought condos were units in a high-rise building. But, condos are a form of ownership not a type of construction. While high-rise buildings are likely the common type of condos, they can also come in the form of townhouses, duplexes, or even single-detached houses.
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Now that we know exactly what a condo is, let’s talk about some of the pros and cons of buying one.
The pros of buying a condo
Pro #1: Low maintenance
In a condo, it is highly unlikely that you will be responsible for any upkeep on the exterior of your unit. Things like landscaping, snow plowing, roof repairs, fallen branches after a storm, exterior window cleaning are covered by the HOA (homeowners association). The monthly fees you pay to be a part of the condo community covers these types of maintenance fixes.
Tip: A rule of thumb to guide your purchasing is to check that the annual increase in the monthly maintenance fee does not exceed the general rate of inflation (about 3%).
Pro#2: Urban-setting location
For some folks, being close to downtown and urban activities is a must. Condos, as opposed to single-family homes, tend to be located in more densely populated areas and therefore closer to the action. If you want to live near urban hot spots like shops, restaurants, and public transit, a condo will likely offer this.
Pro #3: Amenities
If you are like me, I love luxury amenities where it feels as if I’m on vacation. Depending on the condo, the amenities could include a sauna, hot tubs, pools, business centers, and valet parking. And due to the first benefit mentioned, you are not responsible for the related maintenance.
Pro# 4: More affordable
Generally speaking, condos are often less expensive than a single-family house. While there will be upfront and monthly management/maintenance fees, the overall cost tends to be lower.
Pro #5: Community
Although neighborhoods of single-family homes also have a community aspect, you generally have more regular opportunities to socialize with a condo. This could be picking up mail, social events put on by the HOA and/or management company, and community meetings to discuss matters related to the property.
The cons of buying a condo
Con #1: Monthly fees
With the benefit of low maintenance, comes the drawback of monthly fees. What you save in time, you spend in money.
Outside of your monthly mortgage payment, there will be monthly association fees. You can think of these fees as membership dues that can range anywhere from $100 to $1,000+. These fees cover amenities such as grounds maintenance, security, and more.
Tip: Ask how much money is in the association’s reserve fund, or repair fund. This fund helps cover unforeseen expenses. Ideally, there is at least 10% of the annual revenue in the fund.
Con #2: Harder to sell
As with all real estate, location is everything. Depending on the location, in general, condos do not appreciate in value as quickly as homes do. It’s quite possible that you could lose money when it comes time to sell. With that said, there are locations where condos appreciate just as quickly, or even more so than homes.
Additionally, if your condo neighbors are also selling it will be hard to differentiate yourself from the competition. One workaround to this is to choose a unit with an attractive location within the building - such a corner unit with more space, or a unit that receives a lot of sunlight.
Tip: You could also opt to rent your condo. However, some HOAs place restrictions on renting.
Con #3: Less privacy
Depending on the unit you choose, you may have a neighbor above you, below you, or very close to you. This means you can not play your music as loud as you may wish or when using the pool/communal areas, other condo owners may be using it at the same time.
Con #4: Limited parking
Depending on the condo community, there may be limited parking and/or fees related to parking. Single-family homes, on the other, have built-in parking.
Con #5: Less control
Condo associations can restrict certain activities, such as smoking or even barbecuing on balconies. Additionally, modifying the exterior - and sometimes the interior - requires consent from the association. Yes, you may own your condo, but you still need to get permission to do certain things. Violating these rules could result in fines or being removed.
Disclaimer: the content presented in this article is for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.
