Condos: Everything You Need To Know

From community living to walkable urban areas, condos are great options for first-time home buyers and people looking to enjoy homeownership without extensive upkeep.

Let’s explore the pros and cons of buying a condo, the different types of condos you may come across and the key differences between a condominium, an apartment, a townhome and a single-family home. 

What Is A Condo?

A condo, also known as a condominium, is a housing or residential complex in which there are separate units and each unit is owned by an individual condo owner. When someone rents a condo, they rent directly from a condominium owner.

Condo owners are responsible for what goes on within their individual units, including maintenance and repairs. Beyond that, they must pay regular fees to a homeowners association (HOA). The fees contribute to the maintenance of shared common areas, building amenities and the exterior of the complex.

Should You Buy A Condominium?

Your financial circumstances will play a large part in determining whether a condo makes sense for you. Besides that, condos have plenty of unique advantages and disadvantages to consider.

Pros Of Buying A Condo

The benefits of purchasing a condo versus renting or owning a single-family home include property ownership with added amenities, less upkeep and affordability. Condominiums are great choices for many people.

Let’s take a closer look at the pros:

• Build equity: Financially, one of the biggest perks of buying a condo is that it allows you to start building equity. When you pay monthly rent, that money is gone. It doesn’t help you in the long term. Paying off a mortgage increases your stake in a property and gives you more options in the future. And you can reap the benefits of any increase in the condo’s resale value.
• Added amenities: Depending on the complex, you may have access to amenities like a pool, dog park or parking garages. Because the shared amenities are typically maintained by a HOA, you enjoy them without having to maintain them.
• Sense of security: Many condos include features like gated entrances or hired security guards. Additionally, the proximity of neighbors and the sense of community can make condos feel safer for residents.
• Less maintenance: Condos are popular for people who want to own a residence but don’t want to deal with the upkeep that comes with owning a single-family home. If you like the idea of owning your own place without needing to mow a lawn, shovel snow or repair a roof, a condo may be a great fit for you.
• More affordable: Typically, condos are less expensive than traditional homes and are great for first-time home buyers with modest salaries. While you must factor in condo association fees, a condo can be more affordable than a free-standing house. If you delayed or disregarded homeownership over affordability concerns, a condo may be closer to your price range.
• Investment property: The pros outlined above are why many real estate investors purchase condos. Relative affordability, less maintenance and attractive perks and amenities for renters can make them an appealing investment.

Cons Of Buying A Condo

Like any home purchase, there are considerations to keep in mind when you’re looking to buy a condo. If you don’t want to pay additional costs on top of your mortgage or abide by community rules, condo living may not be suitable for you.

Let’s further define the cons:

• HOA restrictions and fees: When you buy into a condo complex development, you also buy into rules set by its The rules can include rental limitations and pet restrictions. Additionally, you’ll pay a monthly HOA fee for the upkeep of the common areas and building. These fees will vary depending on the location and size of the condo.
• Less square footage: Large families or buyers who prize outdoor space may feel cramped in a condo. Condo units usually don’t have private outdoor space, and you may need to walk a fair distance to find a park or playground.
• Less privacy: Condos share common areas and walls. With this shared space comes the feeling of community – but a lack of privacy. Shared space can mean noise problems.
• Resale challenges: Reselling may be difficult because factors – like the financial health of the condo association and the rigidness of its HOA covenants – are outside your control.
• Limited personalization: Depending on HOA rules, there may be restrictions to changes to the exterior of your unit or prohibitions on flags or decorations.

The pros and cons of buying a condo will vary depending on the type of condominium, its location, the size of the complex and the type of tenant.

Condo Vs. Other Property Types

Condos are often confused with apartments and townhouses. To clarify things, we’ve included the table below. We’ll also go into more detail about the differences between condos and other types of homes.

Condo Vs. Apartment

The main differences between a condo and an apartment include who owns it, how they’re run and governed and their costs:

Ownership

Typically, apartment buildings are owned by a property management company, while condos are individually owned units. Instead of answering to a property manager, condo dwellers form a condo association that collects dues to cover maintenance costs for the common areas in the condominium complex.

Costs

Condo owners must worry about costs like the mortgage payment, HOA fees and property taxes and insurance. If you’re renting, you may not notice much of a price difference between rent for an apartment and rent for a condo. However, the makeup of your payments may be different if you’re renting a condo. Your landlord may have it written in your lease that you’re responsible for association fees and utilities, or they may adjust your rent to cover the cost.

Maintenance

Condo owners are responsible for any maintenance or repairs needed within their units. This is true whether they live there or rent their unit. An apartment will likely have a maintenance staff that is knowledgeable about how to deal with most problems. With a condo, there may not be a maintenance staff. The owner must solve the problem.

Condo Vs. House

Single-family homes are often purchased outside of city centers because they generally cost more than their condominium counterparts. Typically, the decision to buy a condo versus a house is based on your desire to live in an urban neighborhood or have more square footage.

Let’s look at the ways in which houses are often favored over condos, as well as some key differences that separate the two:

Ownership

A house is a free-standing structure that doesn’t share any walls with other residential or commercial buildings. Homeowners own both the property and the land it sits on. The land may include a front yard, backyard and garage.

Costs

Generally speaking, detached single-family homes cost more than condos. They typically have more square footage. When you purchase a home, you own the property and the land it sits on. However, as a prospective home buyer, you should consider additional costs like yard maintenance and property taxes.

Maintenance

The maintenance of a home is significantly more work than a condo since you’re responsible for the house and the lot. While renovations may increase the value of a home with sweat equity, it’s important to consider the initial investment of time and money.

Condo Vs. Townhouse

A townhome (or townhouse) is where a condo and a single-family home intersect. Typically, townhomes have multiple stories and may share walls with neighboring units – but not units above or below.

Here’s how townhomes stack up against condos:

Ownership

Townhomes have two primary ownership structures: condominium ownership and fee-simple ownership. When you own a condominium townhome, your unit responsibilities are similar to owning a condo unit. You own what’s inside your unit and pay HOA fees to cover the unit’s exterior and all common areas. Fee-simple townhome ownership means you’re responsible for the property and the land it sits on.

Costs

Townhomes tend to be more expensive than condos because the size of the lot is typically bigger than a condo. You also tend to pay more overall in HOA fees for townhouses, but you should consider the costs associated with maintenance on the house and property.

Maintenance

When you own a condo, you’re only responsible for everything inside the unit. When you own a townhome, you pay to maintain the interior, roof, exterior and property. That’s why the HOA expenses are usually higher.

Types Of Condos

Below, we’ll explore six different types of condos and how ownership varies.

Condo Home

A standard condo home is a residential property where the portion of the building an owner owns consists of the interior of their home. When you own a single-family residence, or what you may traditionally think of as a house, you own the dwelling and the property it sits on. Condo homes can also be used as a primary residence.

Condo Share

A timeshare condo, or condo share, is typically used as a second home or vacation home. Its tenants are allocated use of the condo for a certain time and number of days each year.

Condo shares generally have fees like maintenance and property taxes and aren’t considered investment properties. These types of units can be a great way to own a vacation property in a desired location for a fraction of the price of a resort or hotel. But they can also be difficult to sell.

Detached Condo

Detached condos have the advantages of condominium living with minimal upkeep and planned communities within an HOA. The major difference between detached condos and condo homes is the lack of shared walls. A detached condo community is typically near cities, and units are often clustered together.

Private Condo Or Private-Owned Apartment

A private condo, or private-owned apartment, is owned by its respective unit’s landlord. Typically, private condos are rented out to tenants, but they differ from standard apartments in terms of property management and options to customize. The application process, criteria and deposits may vary with private rental condos.

Condo Building

A condo building refers to a complex made of individually owned units. Ownership is typically controlled by an HOA or community property management that performs property upkeep and some maintenance.

Condominium Development

With freehold condominium developments, the developer owns the land the units are on. When a tenant buys a condo, ownership is transferred to the buyer. The key difference between freehold condo developments and traditional condo buildings is that the owners of freehold condos are responsible for upkeep and maintenance on their units, including exterior walls, while management maintains the common areas.

FAQs About Condos

We put together some FAQs that pop up when discussing condos.

What financing options are available for condos?

You can buy a condo with a mortgage. There are different types of mortgages that can be used to purchase a condo, including conventional loans. You should check with a condo’s HOA to see if they have any financing restrictions.

What are the benefits of a condo versus an apartment?

Owning a condo can be more beneficial than renting an apartment because condo ownership allows you to build equity. Also, a fixed-rate mortgage payment gives you more certainty in the long term because you no longer need to worry about rent hikes.

What does it mean to rent a condo?

Condos are typically owned, not rented. When you rent a condo, you’re likely leasing it from the owner. Alternatively, if you’re the condo owner, renting a condo means you use it as a rental property and charge rent.

The Bottom Line

Condos can be a wonderful way to own a home, especially if you want to minimize maintenance responsibilities. But whether you decide a condo or a house is right for you, the next step is to start your mortgage approval online. Shopping with a preapproval in hand will give you confidence. It’s also often a priority for sellers to know you have the money you’re offering. So if you want to make an offer on an attractive property quickly, getting a preapproval should be first on your list.

If you’re ready to buy a condo, start your mortgage application online today with a Home Loan Expert at Rocket Mortgage^®.