Home or Condo?

Home vs. Condo Ownership

Buying a home is both a business decision and a lifestyle choice. More importantly, it’s an investment and you must consider the risks and rewards. There are many benefits to home and condominium ownership, and I will help you to distinguish among them so that you will be able to make an informed purchase decision.

What are the Benefits of Condo/Town Home Ownership?

  • Sets you on the path to financial freedom- why waste your money when you can be building something of value for yourself?
  • Affordability-less expensive than owning a home
  • May be more convenient than owning a single family home
  • A host of amenities are typically offered (pool, tennis, security, clubhouse)
  • Residents of Condominium communities have a financial stake in the property, versus apartment dwellings
  • Owner has control, unlike an apartment setting
  • Lower insurance and property taxes versus a single family home
  • Condominiums are often located in prime locations accessible to parks, public transportation and retail
  • Sense of security living among residents in a tight knit community
  • Low to no maintenance

Renting Vs. Owning Cost Comparison

  Monthly Rent   Total Amount of Rent You Will Pay Assuming a 5% Annual Inflation Rate
3 Years 5 Years 10 Years 20 Years 30 Years
$200 $7,566 $13,261 $30,185 $79,357 $159,453
$250 $9458 $16,578 $37,734 $99,200 $199,317
$300 $11,349 $19,892 $45,281 $119,037 $239,180
$350 $13,241 $23,208 $52,827 $138,876 $279,043
$400 $15,132 $26,523 $60,373 $158,715 $318,906
$500 $18,915 $33,154 $75,469 $198,380 $398,633
$600 $22,698 $39,785 $90,562 $238,076 $478,360
$700 $26,481 $46,415 $105,655 $277,754 $558,086
$800 $30,264 $50,046 $120,748 $317,429 $637,813
$900 $34,047 $59,676 $135,841 $357,111 $717,540

What Should I Consider About Condominium Ownership?

  • Condo ownership usually costs more monthly cash flow than renting an apartment
  • Shared operating costs and maintenance of the shared common areas (lobbies, parking lot, community entrance)
  • Instant neighbors – if you are social, this can be fun! If you prefer your privacy, you may want to give this some consideration
  • Each owner must abide by standard rules and regulations set forth by Homeower’s Association By-Laws and Covenants
  • Condo communities may have pet restrictions, outdoor grilling restrictions, and specific rules of conduct
  • Condominiums may be subject to assessments (increases or decreases in monthly association fee paid by individual owners); these may change based on changes in budgeted expenses
  • Home Owner’s Association Fees often include water, gas, sewer, & electricity; services included may vary among different communities
  • Insurance is required for common elements and general liability around property is covered in monthly association fee
  • Community property is typically managed by the condo association who elect directors and officers among themselves to oversee future decision making and operations

What are the Benefits of Home Ownership?

  • Homes may have greater re-sale appeal due to larger pool of buyers seeking the square footage afforded by single family homes versus condominiums
  • Homes afford privacy and “fee simple” control over property
  • Homes offer a variety of options in style of architecture, design, floor plans, and square footage
  • Most homes are pet friendly and child friendly – accommodating versatile needs of different buyers
  • Many neighborhoods are conducive to outdoor exercise and often afford similar amenities (pool, clubhouse, tennis, security) to condominium living

What Should I Consider About Home Ownership?

  • Homes require ongoing maintenance and upkeep; a home owner is solely responsible for this unless he elects to outsource these services
  • Property taxes and homeowner’s insurance fees are typically higher for single family homes due to lender requirements
  • Homes occupy land, and land is an invaluable resource; homes are subject to a greater appreciation value over time because the purchase of a building structure on land is an invaluable resource versus condominium ownership, the purchase of space.
  • When the housing market is terrible for the home owner, it always eventually gets better and that’s a good thing if you plan on staying in your home for 5 to 10 years. A challenging housing market typically only hurts those who “flip” (buy and sell houses for profit over a short period of time).
  • Property taxes and mortgage interest are deductible at tax time.
  • Opportunity to build equity: As you continue to pay on your mortgage, more of the payment will be applied to the principal balance. Typically, the value of your home appreciates at the same time. This also builds equity.
  • You may have the option use the equity in your home by refinancing for a larger loan or getting a home equity loan. As a a renter, you can’t “adjust” your rent. Home owners are able to readjust their mortgage payment based on loans and national interest rates.
  • Zoning changes can affect your property. A huge commercial development going up next door could effect your investment value.
  • Economic conditions can change. Major changes in your area may flood the market with too many homes for sale. If you’re a renter, you get pack up and move. If you’re a home owner, you have to face and deal with natural consequences that may result.
  • As a homeowner, you may hedge against inflation with real estate. Real estate appreciation often outpaces inflation rates in times of growth.

Condo ownership is not for everyone, but then again, neither is owning a house. I encourage you to give serious consideration to the pros and cons of each to determine which best suits your needs and lifestyle.