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Condo vs. Apartment vs. House, Explained

lifestyle grid teaser 02What is a condo?

What is a condo? Short for “condominium,” a condo is a private residence within a larger building or complex. The first condo in the United States was built in Salt Lake City in 1960, according to Matthew Gordon Lasner, author of "High Life: Condo Living in the Suburban Century." Since then, this residence style has truly taken off. Currently, there are approximately 17 million privately owned condominiums in the U.S.

Condos might look like a lot of other types of real estate you may have heard of—like apartments, co-ops, or townhouses—but condos have their own distinct features, rules, pros, and cons. Here's what condos are all about, and how they're different from other structures in which you can live.

How condos work

Since a condo is part of a larger residential structure (although "detached condominiums" also exist), condo residents typically share certain common areas and amenities with their neighbors.

So what does this mean for a condo owner? It means you and your neighbors might park in a common parking lot or garage. You might use the same rec room or roof deck, or bump into one another at the condo complex's swimming pool or gym.

Furthermore, these shared areas and amenities are enjoyed by all condo members without the need to maintain them on their own. Instead, condo owners pay dues to a board (typically made up of elected condominium owners) who then handle the hiring of landscapers, pool cleaners, and other professionals for anything that must be maintained or fixed, from faulty elevators to gopher infestations in common areas.

How much are condo fees, and what do they cover?

Average condo fees range from around $100 to $700 per month, although these fees can go much higher based on what amenities they cover. If the condo complex has high-end shared features such as a swimming pool, gym, and spa, condo fees can be several thousand per month.

Generally, condo fees pay for the maintenance of any amenities outside your personal living space that you share with your neighbors.

“Condo fees are your percentage share of the costs to run the building as a whole," explains Janice Pynn, president of Simerra Property Management.

And in case you think your condo fees are too high, know this: No one pockets a cent of your checks or is getting rich off condo dues.

“They are not a profit source for building management; in fact, each building is registered as a nonprofit corporation," Pynn points out. In other words, these fees go solely toward enhancing the value of your real estate, which is a good thing!

Here are the services and amenities you can expect your condo fees to cover:

  • Interior maintenance: Condo owners share the cost of maintaining common building areas like parking structures, storage rooms, laundry rooms, game rooms, fitness centers, saunas, and hallways, as well as mechanical systems like heating, cooling, electric, gas, plumbing, and elevator maintenance. If a crew comes regularly to clean the common spaces, its fees are also included.
  • Exterior maintenance: Condo owners also share the cost of exterior common areas like fences, walls, gates, pools, landscaping, and window cleaning, and seasonal expenses like snow removal, winterizing, and cleaning out rain gutters. If a gardening crew comes regularly to take care of the landscaping, its fees are also included.
  • Security: This could range from cameras at the entrance to full-time guards patrolling the grounds. If visitors have to be buzzed in to the building, this system will be covered by your condo fees.
  • Utilities: Most developments’ condo fees cover utilities such as water, sewer, and trash. Some buildings even include heat, electricity, cable, and Wi-Fi. Remember that the more utilities covered, the higher your condo fees will probably be.
  • Insurance: Most condo fees include a homeowners insurance policy that covers exteriors and shared common areas. Depending on where the condos are located, the insurance policies might also cover flood and/or earthquake damage. The nice thing here is that condo owners need only to purchase insurance policies that cover the interior of their home and their possessions.
  • Reserve fund: There are expenses that don’t come up on a monthly, or even an annual, basis that will need attending to, so a well-managed condo board will charge owners a certain amount per month that will go into a reserve fund. It would cover things like paving, reroofing, replacing water heaters, exterior painting, hallway and lobby flooring and redesign, and more.

What is an assessment?

In addition to your monthly condo fees, special assessments might arise. Every once in a while something big (e.g., a roof or an elevator) gives out, and there aren't enough reserve funds to cover it. In that case, the condo owners will have to pay an extra fee for these additional expenses, typically tacked on to the usual monthly condo fees in small amounts until the assessment is paid off.

At times like these, it’s best to remember that, as with any type of homeownership, unforeseen expenses arise, and making the necessary repairs is in your best interest. In other words, you get out what you put in.

In addition to collecting dues, a condo board also enforces rules and regulations that owners agree to abide by when they purchase their condominium. The board can regulate everything from the size and number of pets you’re allowed to the ages of the people living in your unit. Retirement condo communities, for example, can legally require that all long-term residents be over the age of 55.

So if you're looking into buying a condo, make sure to study up on the condominium association rules (called covenants, conditions, and restrictions, or CC&Rs) and fees.

Condo vs. apartment: What's the difference?

While condominiums and apartments might look exactly the same—a residence in a larger building—the key difference has to do with who owns the property. Condos are homes you can buy, own, and sell when you wish. Apartments are places you can rent, but do not own.

Another key difference between a condo and apartment has to do with property's maintenance and repairs. With a rental, the apartment's owner—often called a landlord—is typically responsible for any maintenance and repairs inside the unit as well as out. So for instance, if a renter's faucet drips or they've got pest problems like mice or roaches, all they need to do is call the landlord to come fix the problem.

Condo owners, in contrast, are responsible for any repairs or maintenance inside their unit.

Condo vs. apartment: Which is better for you?

Whether you should buy a condo or rent an apartment can be a tough decision, since each scenario comes with distinct pros and cons. For instance, renting an apartment is great if you're not sure how long you'll stay in the area, or don't want the hassles of maintaining your residence.

Buying a condo, however, makes more sense if you plan to stay in an area for at least a few years, and are willing to maintain your property (by paying repair professionals or by doing the work yourself).

Here are some other factors to consider.

  • Cost: Condos are meant to be purchased. Even if you get a mortgage, condos will typically require a down payment (typically anywhere from 3.5% to 20% of the price of the property). If you lack a chunk of money to offer upfront, then you'll probably have to rent, which typically requires lower upfront costs (like first and last month's rent and one month's security deposit). That said, depending on the inventory available in a particular area, the monthly costs of renting vs. owning could be similar. As such, it's worth comparing these two options with an online rent vs. buy calculator.
  • Home equity: Probably the main advantage for being a condo owner over a renter is that condo owners gain equity in their real estate over time. As they slowly pay off their mortgage and owe less on their property, they own bit more of their condo free and clear, month by month. Once the mortgage is fully paid off (which can take up to 30 years), they own the property in full. This is in stark contrast to renting, where you pay your landlord rent every month but do not gain equity.
  • Freedom: Condo owners are able to make changes to the property from painting the walls to renovating the kitchen. Meanwhile, renters are not allowed to make any permanent changes without their landlord's permission.
  • Housing quality: Since homeowners tend to care more about their property than renters, condos tend to be better built and maintained than rentals.

Condo vs. house: What's the difference?

But what if your real estate debate is whether to buy a condo vs. house? Take a look at the differences between these two popular residential options, and the benefits each can provide to you and your family.

  • Price: Condos are usually more affordable than a house, and are thus great starter homes for younger home buyers. To figure out how much you can realistically spend, try using an online home affordability calculator.
  • Location: If you want to be in the heart of the city, condos will be more prevalent. Single-family homes at around the same price could be found, but likely farther out from metro centers, which might entail a longer commute.
  • Privacy: Having complete privacy is possible in a single-family house, while condo living means neighbors will be quite close. Condos may not offer private outdoor space.
  • Freedom: Many condo communities have strict rules about everything from paint choices to the hours when you can take out your trash cans. As a result, a condo complex isn't a great idea for fiercely independent homeowners who don’t want anyone telling them what they can and can’t do with their property. Single-family home communities tend to be more lenient.
  • Maintenance: With a house, the homeowner will have to take care of any maintenance, whereas condos include maintenance fees that cover landscaping and (sometimes) exterior maintenance on the unit. As such, condominiums are often ideal for people who want to own a piece of real estate but don’t want to worry about yardwork and repairs.
  • Budget: How much do you want to spend on the property? Condos are usually more affordable than a house. Give this point considerable thought. The last thing you want is to overextend financially. Try using an online home affordability calculator to help pinpoint a budget.

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