When you're looking to buy a home, there are plenty of choices available. One of them is a condominium. As you may already know, a condominium is a large property complex that is divided and sold in individual units. Compared to a single-family dwelling, ownership in a condominium includes partial ownership in shared "common property". This presents unique challenges for condominium buyers. If you're considering buying a condo, read on to learn a little more about this type of property and what ownership entails.
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What's a condo?
In a condominium (commonly known as a condo) some parts - your residence - are owned privately, while others - common areas - are owned collectively by all of the condominium's residents.
A less technical way to think of a condo is an apartment that you own. In practice, condos often take the form of an apartment or similar shared complex, but theoretically, a condo could physically look like anything.
Condos are especially popular in places with high property values - vacation hotspots and urban settings are both places where you can expect to find them on the market. This is largely because buying a single-family home can be prohibitively expensive in places where additional building space may be scarce. As such, condos can open home ownership to whole new groups of people Therefore, if you're ready to own your own home, but can't quite afford a house, a condominium could be a way for you to get into the market. (To learn more, read To Rent Or Buy? - Part 1 and Part 2.)
Searching for the Right Condo
Looking for a condo involves the same process as shopping for a single-family home. If you have a general idea of what you're interested in, going to a real estate agent can be a great way to find out about properties that you might not be able to find on your own.
If you're more of a do-it-yourself person, you can search real estate websites and listings for condos in the area you are interested in. If you have a specific building or complex in mind, many offer on-site sales offices where you can learn more about the condominium and perhaps even view a show suite.
The Condo Sales Contract
It's not just the sales contract that you have to think about when you're buying a condo; condos also have an agreement, or declaration, that dictates the way the condominium operates and is governed. Before buying your condo, you should request and read the documents that apply to the management of the complex. What are the hot issues for this complex? How big is the condominium's reserve fund? How does management deal with owners' requests and complaints? Does the condominium impose strict rules and guidelines on owners that you would be unhappy with? You need to get a sense of whether the condominium you are considering is well run, whether the rules and restrictions would allow you live the lifestyle you're seeking and whether the building/complex is experiencing any problems that could hurt the value of your share of ownership in the future.
Why a condo?
There are lots of reasons that a condo might be a better fit than an apartment or single home, and money is surely one of them. According to The Real Estate Journal, condo prices tend to appreciate at a slower rate than single-family dwellings, making them a more affordable choice in markets where prices are on the rise. And, compared to renting an apartment, because you actually own your condo, you can take advantage of tax deductions such as the interest on your mortgage. (To learn more, read The Mortgage Interest Tax Deduction.)
Conversely, it's important to remember that the purchase price isn't the only thing to consider when you're buying a condo. Most co-ops and condos have monthly fees for upkeep of the common property (these can be costly) and, unlike renting an apartment, you'll have to pay property taxes, too. (To learn more, read Five Tricks For Lowering Your Property Tax.)
Granted, it's not all about the money. Condos also provide attractive lifestyle choices for many prospective buyers. They're especially popular for retirees who want to be able to socialize or take advantage of services at communities that cater specifically to seniors. Living in a condominium can also free you from some of the usual chores that go along with owning a house, such as yard and exterior maintenance. (To read more about this topic, see Downsize Your Home To Downsize Expenses.)
Finally, condominiums can also make owning a vacation home more affordable. In the United States, condos became popular as a more reasonable way to buy a little piece of paradise in places like Florida and Hawaii. If you want to relax at the beach, but cringe at the thought of buying a pricey house down in the sunshine state, condos offer a somewhat less expensive alternative. (To learn more, read Investing In A Vacation Home.)
The Bottom Line
If you're thinking about buying real estate, whether as an investor, vacationer or year-round resident, condos are definitely something that should be on the radar. This is especially true if you're looking at an area where real estate is expensive. Condos aren't inherently better or worse than any other type of residence, but depending on your situation, a condo or co-op could be a fantastic choice as a homebuyer.
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