It is also essential to determine whether the condo building or complex is experiencing any problems that could hurt the value of your share of ownership in the future. There are many reasons why a condo might be a better fit than an apartment or a single home, and money is undoubtedly one of them.
According to the Real Estate Journal, condo prices tend to appreciate at a slower rate than single-family dwellings, making them a more affordable choice in markets where prices are on the rise. And compared to renting an apartment , because you own your condo, you can take advantage of tax deductions such as the interest on your mortgage. Condos also provide attractive lifestyle choices for many prospective buyers.
Living in a condominium may also free you from some of the usual homeownership chores, such as yard and exterior maintenance. They may also have desirable shared amenities, such as pools, fitness rooms, or tennis courts. Finally, condominiums can make owning a vacation home more affordable. In the United States, condos became popular as a more reasonable way to buy a little piece of paradise in places such as Florida and Hawaii. If you want to relax at the beach but cringe at the thought of purchasing a pricey house down in the sunshine state, condos offer a somewhat less expensive alternative.
A condo also has the benefit of having someone else watching your property when you're back at work and miles away from the beach. Depending on the rules and location, you may also be able to help pay for that vacation condo by renting it out when you're not there.
There are some potential downsides to owning a condo. For example, even if you don't use your condominium's amenities, you still have to pay for them. You also pay for the maintenance on the grounds and any communal spaces in the complex. Condominiums have HOA fees and assessments to cover these costs, and often these charges rise annually. Over time, this could impact your long-term budget.
If you are the kind of person who doesn't like to follow a specific set of rules for yourself or your guests, a condo complex with a long list of regulations for its homeowners could be frustrating over time. Last, a condo isn't always as easy to sell as a house, especially if yours comes with higher-than-average HOA fees or if your condo board has stringent rules for its condo community. For example, if your complex doesn't allow young children, you lose a subset of potential buyers.
When you purchase a condo as an investment, vacation home, or year-round abode, it is important to read all the condo rules via the agreement. Make sure you understand how the condo's management team operates and how the condominium complex is governed. Ask about HOA fees, as well, because when you buy a condo, you must pay for the collective amenities and their upkeep such as a pool, clubhouse, or tennis courts.
HOA fees cover reserve funds and regular maintenance and repairs, and you should be aware of separate assessed fees that could occur down the line. Condos can be a good way for first-time buyers to enter the housing market. Condo prices tend to be lower than single-family homes, and just like owning a house, there are tax advantages for condo owners.
A first-time buyer may also benefit from condo amenities that would not be affordable as part of a traditional, single-family house. They can be, but there are several factors to consider when buying a condo as an investment. First, where is the condo located? Is it in a popular vacation spot or a town or city where condos are in demand? Does the condo come with great amenities and low fees?
A condo in a highly desirable location with quality amenities will likely keep its worth and appreciate over time. Vacation condos can be excellent vehicles for earning money, especially if the amount of rent you charge covers your mortgage and HOA fees.
It is important to note HOA fees must be paid and may go up every year. These fees cover the cost of taking care of communal complex spaces and pay for maintenance like landscaping and repairs.
You should pay attention to these costs and factor them into your budget before calculating your investment's potential return. If you want to buy a condo or a home with a conventional mortgage, you will need a credit score of approximately If you plan to use an FHA loan for your condo purchase, your score needs to be at least But a condo is typically tens of thousands of dollars cheaper than a single-family house. For perspective, the bigwig number crunchers at the National Association of Realtors found that the U.
Yes, condos generally appreciate in value. If you find a condo in a cool location and a single-family house in a lousy location, the condo will probably appreciate faster. Compared to other types of properties, condos are unique. So, make sure you sort through what makes them different before you decide to live in one. So what is an HOA? It keeps everything in tip-top shape and looking pretty.
The HOA is made up of owners who actually live in their unit or a group of outside investors—which would include you! If the pros outweigh the cons for you, your next step is to make sure you buy a condo the smart way. Find out if expensive features like HVAC systems and shared amenities are up-to-date and are on a schedule for regular maintenance. See if you can contact previous owners about what they thought of the community and why they left.
Make sure there are more owners than renters. And having more renters than owners usually goes against the guidelines set for normal financing options. So, the condo values are going to drop like a rock!
Well, at that point, the only people interested in the condos will be cash buyers and investor buyers. Special assessments are extra charges the condo association imposes to fund a significant project. A well-run association can usually avoid special assessments, except in extraordinary cases. Pay close attention to whether the budget has adequate reserves — is it being funded now in preparation of a future or unforeseen project?
Having these funds is especially important if the building is older. Here are some top things to consider. Whatever your preferences, carefully consider your financial situation and housing needs. Consult with a real estate professional who specializes in condos to guide you in your home search and protect your interests during the buying process. How We Make Money. Zach Wichter. Written by. Zach Wichter is a mortgage reporter at Bankrate. Edited By Suzanne De Vita.
Edited by. Suzanne De Vita. Suzanne De Vita is the mortgage editor for Bankrate, focusing on mortgage and real estate topics for homebuyers, homeowners, investors and renters. Reviewed By Jeffrey Beal. Reviewed by. Jeffrey Beal. Jeffrey L. Beal, president of Real Estate Solutions, has 40 years' experience in multiple phases of the real estate industry. Share this page. Key Principles We value your trust. What is a condo? Read more From Zach. About our review board. You may also like Condo vs.
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