In 2020, the US homeownership rate reached its highest level ever – 65.5%. Most of us probably grew up dreaming of owning our own home. But the housing market right now is red hot and many first-time buyers don’t stand a chance.
Condos can offer a more affordable alternative to standalone homes – whether you’re renting or buying. There are pros and cons on both sides of the renting versus buying argument. But if you’re ready to fly the nest but are not sure about your options, our handy guide can help you make the right decision.
Let’s take a deep dive into whether to rent vs buy a condo – what every beginner should know.
What Is a Condo?
If you’ve spent your whole life living with your parents in a single-family home, the concept of a condo might be new to you. Simply put, a condo is a privately owned individual unit, usually an apartment but sometimes a house. The common areas are jointly owned – think hallways, garages, elevators, and pools (if you’re fortunate enough to have one).
A homeowner’s association manages the common areas. They also oversee other restrictions that apply to your property.
If you buy a condo you can usually rent it out. But you’ll need to check the terms of the covenants, conditions, and restrictions (CCRs) as they vary from condo to condo.
Some typical restrictions include:
- Occupancy limits
- Restrictions on short term rentals, like Airbnb
- Pet conditions
- Home maintenance standards
The advantage of an HOA is that they keep the communal areas in great shape. But condo maintenance remains the responsibility of the owner.
Pros of Renting a Condo
Renting gives you total flexibility. If you move into your condo and don’t like it, you’re not stuck with it. There’s no need to go through an expensive selling process.
Simply find out how to terminate your lease, hand back the keys, and get on with your life. There’s no need to feel that rent was wasted money. It put a roof over your head, so it did its job.
This is perfect when life presents unexpected opportunities. Maybe you decide to get married and move out of state. Or you get a great job offer but it’s overseas.
Renting a condo allows you to be more agile than buying a condo would.
Another advantage of renting is that it’s a lot less complicated than obtaining a mortgage and buying a condo. You need a steady income for both, but you won’t need a large downpayment to rent a condo.
You’re unlikely to get into major bidding wars which often happen in hot housing markets. You don’t have to go through the expensive process of surveys and raising down payments that buying a condo involves. Plus, there’s no need to take on a major debt that you’ll have to pay for decades.
The final pro is that condo maintenance is the landlord’s responsibility. They are also responsible for the monthly HOA payment, although they may effectively include this in your monthly rent.
Cons of Renting a Condo
The obvious con of renting a condo or any home for that matter is that you won’t see any returns on your monthly payments. It’s likely that you’re paying off the landlord’s mortgage, not your own. When the time comes to move out, you don’t own anything.
Another con is that the landlord can ask you to leave. They may also raise the rent to an unaffordable level or decide the sell the property.
Pros of Buying a Condo
The major pro of buying a condo is that it’s yours – as long as you keep up with the mortgage payments.
If the housing market remains steady or rises, you’re gradually building equity in your property. If house prices rise, you could stand to make a sizeable profit. Of course, if they fall the opposite is true.
As a condo owner, you’re in charge of the decor. You can customize it to your own tastes. As long as it’s with the HOA rules, you won’t have to ask anyone else for permission.
Most people who are considering buying a condo are looking to put down roots in the community. Owning a property can help you to feel settled and grounded. Choose the right area with great schools for the kids and you can enjoy living there for a long time.
Cons of Buying a Condo
One of the pros of buying a condo – the HOA – is also one of the cons.
They limit the freedom you have to do what you want with your home. You’ll always have to check that your decorations and renovations are in line with their requirements. You’ll also narrow your audience when you come to sell your condo because not everyone will be willing to work with an HOA.
Also, you need to factor HOA fees into your monthly outgoings. You do see the benefit of these – beautifully kept outdoor grounds and clean hallways for one. But you’ll never see a financial return on this payment and it can run into hundreds of dollars a month.
You will also be responsible for all condo maintenance. You can give yourself some protection with a home warranty. See more here about what this entails.
Renting Versus Buying – The Winner Is…
The battle of renting versus buying a condo does not have a clear winner.
If you’ve still got some exploring to do, renting a condo could be a great option. It gives you total flexibility and it’s easier to find a place to rent than a place to buy.
But if you’re sure this is your forever home and you want to become part of the community, buying a condo could be the better option. Whether you choose renting or buying, a condo could be an affordable way to live independently!
For more helpful hints, head over to our Real Estate section today!