If you’re one of the many people looking for a new home right now, one of the first questions is this: do you want a house or a condominium?In a nutshell, consider the difference this way: If you like living in an apartment but want to own your own space, consider looking at a condo. They tend to have the same low-maintenance and city locations that make apartments appealing. If you want to have more room and privacy, and don’t mind doing extra work, consider looking at a house.
A financial advisor can help you work out the financial intricacies of buying a home.
Should You Buy a Condominium?
A condominium (or “condo”) is a residential unit inside a larger, multi-unit building or complex. Most condos resemble traditional apartments, although some can have independent entrances and other exterior features. When a condo has its own entrance it will typically share one or more walls with other units. In many cases the primary difference between a condominium and an apartment is that the resident owns a condo, while a third party owns an apartment.
A condominium involves both unilateral and shared ownership. When you buy a condo, you unilaterally own the physical space defined by your title. Sometimes this is described as “owning the air” inside the walls of the condo. You control the use, occupancy and equity of this space. For example, the title may define your condominium as “Unit 3F, with the following dimensions and precise characteristics.”
You also share ownership and responsibility for the condominium’s community spaces. This includes the walls and floors of your condo, as well as spaces like stairways, lobbies, exteriors and more. You use this space subject to the rules set by the condominium’s residents as a whole and share responsibility for maintenance and upkeep.
Advantages of a Condominium
- City living. Given how expensive a free-standing house can be in a city, these are often the best option for people who want to live downtown and buy their home. Indeed, some particularly big cities may not have free standing houses at all.
- Reduced costs. Condos are smaller which tends to reduce prices relative to houses in the same market. Since condos don’t sit on their own land they also don’t require the expense and labor that comes with taking care of a yard.
- Redecorating. Owning the space means you can repaint, redecorate and renovate in ways that you couldn’t in an apartment.
- Nicer amenities. Condominium buildings might offer pools, gyms, roof decks and many other options that households couldn’t afford on their own.
- Reduced maintenance. One of the best parts of living in an apartment is that you can simply call your landlord to fix anything that goes wrong instead of having to worry about it yourself. Condominiums share this benefit, as the building will handle many, if not all, repairs.
- Security. If you travel a lot, or for any other reason are often not home, a condo is generally more secure than a free-standing house. You’ll have other people around and building maintenance to keep an eye on things for you.
Disadvantages of a Condominium
- Fees and maintenance. Although condos generally have a lower purchase price, they can also come with surprisingly high monthly fees to pay for maintenance and upkeep over the rest of the building. For buildings with particularly nice amenities, this can make a condominium surprisingly expensive.
- Shared space. With a condo, you still share walls and doors with your neighbors. This means that you have to put up with the noise of other people, their complaints, and all the other concerns of a shared space. You might luck out with quiet neighbors or you might take out a 30-year mortgage and move in below an electric guitar player.
- HOA rules. Condos almost always come with rules about how people use their shared spaces. They can also come with rules about how you use your private space. In a well-run building, these rules just keep people from getting in each other’s’ way. In a poorly-run building, these rules can interfere with your quality of life significantly.
- Difficult to sell. It’s often more difficult to sell a condo than a house. This is compounded by the fact that your condo might change the building or its amenities, which will affect your original investment. Some condos may also be non-warrantable, which means that they do not meet all the lending requirements for buyers to get a loan. These may include condos that require memberships, operate as hotels, are part of continuing care facilities, delinquent on HOA dues, or are a party to a lawsuit, among other restrictions.
- Can’t make changes outside. As a general rule, you can’t make changes to the outside of your condominium. You have to live with the public spaces as they are and can’t change your condo in ways that affect the structure around you.
Should You Buy a House?
A house, sometimes called a “single family home,” is a free-standing structure that sits on its own land. Unlike a condominium, it is not part of a larger building. (Some properties, such as duplexes, can blur the lines and represent special cases.)
When you buy a house, you get unilateral ownership of the building and the land it sits on. The only exceptions will be spelled out specifically in your deed, such as if someone holds an easem*nt to drive across the property or if you hold joint title. This means that you control the use, occupancy and equity of the entire building and the land.
Advantages to Buying a House
- No shared spaces. Unlike a condominium, a house doesn’t come with shared space. You won’t share walls or entryways with other people, and any decks or yards will belong to only you. This makes most free standing houses considerably more private than a condo.
- Complete freedom. Subject only to local laws, you can customize a house in virtually any way you see fit. As long as you have the budget and the property space, you can make your house look and feel however you choose. Unless you sign a specific HOA covenant, you don’t have to answer to anyone else when it comes to how you use your house (within the bounds of the law).
- More room. Houses generally give you much more room than a condominium. Not only will a free standing house typically be larger, it will also generally come with yard space that you don’t get with most condos.
- Monthly costs. With maintenance and HOA fees, many condominiums can have surprisingly high monthly costs relative to a house. Although that said, since a house is bigger, it may cost more in utilities and insurance.
- Easier to sell. Houses are generally easier to sell than condominiums. You don’t have to get approval to sell your house, which an HOA may require if you live in a condo.
Disadvantages to Buying a House
- Maintenance costs. When you buy a house, you buy all the most expensive parts of the building. You own the roof, the foundation, the boiler and everything else. If one of these breaks, you have to pay for it yourself. No calling the maintenance team.
- Maintenance labor. You have to do a lot more work to maintain a house than a condo. Unless you’re ready to pay for literally every little thing, be prepared for yard work, light repairs and all of the other upkeep that a condo might provide. On top of that, there’s no late-night office to call if your hot water goes out. You’re on your own.
- Purchase price. A house will typically cost more than a condo. This is generally because houses are bigger and come with yards, but in either case a house is the more expensive option than a condo in most cases.
- Fewer location options. If you want to live in a city, or even just a walking community, it can be very difficult to buy a house. Most people who want to live near any kind of downtown have to choose between condos and apartments.
Bottom Line: Which Should You Buy?
There’s no universal right answer. If you’re thinking about a return on investment, houses can have a higher resale value than condos because of their larger sizes and more extensive outdoor spaces. Condos may also be harder to finance than houses because lenders can have stricter requirements. But, as with all financial investments, you’ll need to consider different factors, including location, taxes, amenities and the condition of either property.
A good rule of thumb to evaluate whether you should buy a condo or a house is to consider your lifestyle. If you like the convenience ofliving in an apartment, from the location to maintenance, then a condo might be the right choice for you. But, if you prefer more room and freedom to control your own space, a house might be the move.
Real Estate Tips
- A financial advisor can help you figure out which housing investment is the best for you. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have free introductory calls with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Let’s skip the guesswork. SmartAsset’s mortgage calculator can help you figure out your monthly payments down to the penny, whether you’re planning for a specific purchase or just trying to feel out the market.
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