An Introduction to Buying a Condominium

When you’re looking to buy a home, there are plenty of choices available. One of them is a condominium—a multi-unit property that is divided and sold into individual units. Compared with a single-family dwelling, ownership in a condominium includes partial ownership in shared “common property.” This aspect of a condo represents unique challenges for buyers.

If you’re considering buying a condo, read on to learn a little more about this type of property and what ownership entails.

Key Takeaways

  • Condominiums come in many forms—townhouses, apartments, and even small homes within a larger development or neighborhood setting.
  • An affordable condominium is a popular choice for a vacation home in beach locations such as Florida, Bermuda, or Hawaii, and high-property value locations, like New York City and Los Angeles. 
  • Before purchasing a condo, it is advisable to request and read all the rules of the condominium complex.
  • Many condominiums offer amenities like swimming pools, clubhouses, tennis courts, and golf courses.
  • In 2020, the condo market took a hit. The economic crisis impacted the desire for shared amenities, and living in close quarters in apartments or townhouses was less attractive to buyers.

How Does Condominium Ownership Work?

What Is a Condominium?

In a condominium (commonly known as a condo), some parts—such as your residence—are owned privately. Others—such as common areas—are owned collectively by all of the condominium’s owners. A less technical way to think of a condo is as an apartment that you own.

In practice, condos often take the form of an apartment or a similar shared complex, such as row townhouses. Still, theoretically, a condo could physically be any shared building.

Condos are trendy in places with high property values—vacation hotspots and urban settings are places where you can expect to find many. This is mainly because buying a single-family home can be prohibitively expensive in cities and towns where additional building space may be scarce. As such, condos can open homeownership to whole new groups of people.

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.

Beyond the Condo Sales Contract

It’s not just the sales contract you have to think about when buying a condo. There is also 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.

Here's what to notice: 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 condo board pose strict rules and guidelines on owners that would make you unhappy?

It is essential to understand whether the condominium you are considering is well run and whether the rules and restrictions would allow you to live the lifestyle you’re seeking in a condo community. It is also essential to determine whether the condo building or complex is experiencing any problems that could hurt the value of your share of ownership in the future.

If you’re ready to own your own place but can’t quite afford a whole house, a condominium could be a way to get into the real estate market.

Condo vs. an Apartment or House

There are many reasons why a condo might be a better fit than an apartment or a single home, and money is undoubtedly 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 own your condo, you can take advantage of tax deductions such as the interest on your mortgage.

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 may also free you from some of the usual homeownership chores, such as yard and exterior maintenance. They may also have desirable shared amenities, such as pools, fitness rooms, or tennis courts.

Condos as Vacation Homes

Finally, condominiums can 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 such as Florida and Hawaii. If you want to relax at the beach but cringe at the thought of purchasing a pricey house down in the sunshine state, condos offer a somewhat less expensive alternative.

A condo also has the benefit of having someone else watching your property when you're back at work and miles away from the beach. Depending on the rules and location, you may also be able to help pay for that vacation condo by renting it out when you're not there.

The Downsides of Owning a Condo

There are some potential downsides to owning a condo. For example, even if you don't use your condominium's amenities, you still have to pay for them. You also pay for the maintenance on the grounds and any communal spaces in the complex. Condominiums have HOA fees and assessments to cover these costs, and often these charges rise annually. Over time, this could impact your long-term budget.

If you are the kind of person who doesn't like to follow a specific set of rules for yourself or your guests, a condo complex with a long list of regulations for its homeowners could be frustrating over time.

Last, a condo isn't always as easy to sell as a house, especially if yours comes with higher-than-average HOA fees or if your condo board has stringent rules for its condo community. For example, if your complex doesn't allow young children, you lose a subset of potential buyers.

Buying a Condo FAQs

What Should I Know Before Buying a Condo?

When you purchase a condo as an investment, vacation home, or year-round abode, it is important to read all the condo rules via the agreement. Make sure you understand how the condo's management team operates and how the condominium complex is governed.

Ask about HOA fees, as well, because when you buy a condo, you must pay for the collective amenities (and their upkeep) such as a pool, clubhouse, or tennis courts. HOA fees cover reserve funds and regular maintenance and repairs, and you should be aware of separate assessed fees that could occur down the line.

Are Condos Good for First-Time Buyers?

Condos can be a good way for first-time buyers to enter the housing market. Condo prices tend to be lower than single-family homes, and just like owning a house, there are tax advantages for condo owners. A first-time buyer may also benefit from condo amenities that would not be affordable as part of a traditional, single-family house.

Are Condos a Good Investment?

They can be, but there are several factors to consider when buying a condo as an investment. First, where is the condo located? Is it in a popular vacation spot or a town or city where condos are in demand? Does the condo come with great amenities and low fees?

A condo in a highly desirable location with quality amenities will likely keep its worth and appreciate over time. Vacation condos can be excellent vehicles for earning money, especially if the amount of rent you charge covers your mortgage and HOA fees. It is important to note HOA fees must be paid and may go up every year. These fees cover the cost of taking care of communal complex spaces and pay for maintenance like landscaping and repairs. You should pay attention to these costs and factor them into your budget before calculating your investment's potential return.

What Is a Good Credit Score to Buy a Condo?

If you want to buy a condo or a home with a conventional mortgage, you will need a credit score of approximately 620. If you plan to use an FHA loan for your condo purchase, your score needs to be at least 580.

Do Condos Appreciate in Value?

Historically condos have appreciated or held their value. In 2020, the economic crisis did stall the condo market due to rising inventory in stock (more people sold off their condos). Buyers were not as attracted to condos' shared amenities and close living quarters. In fact, in 2020, the median sales price of condos was below single-family homes, as more buyers sought stand-alone houses with more room. However, condos in desirable locations should continue to provide a good opportunity for investors.

The Bottom Line

If you’re thinking about buying real estate—whether as an investor, a vacationer, or a year-round resident—condos are 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 could be the right choice for you as a home buyer.

Article Sources
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  1. "How High an HOA Association Can Raise Dues or Assessments?" May 10, 2021.

  2. "Which Has a Better Return on Investment, Condos or Single-Family Homes?"

  3. Lending Tree. "Average Credit Score to Buy a House in 2020."

  4. Zillow. "How The Condo Market Stalled in 2020, Even as Single-Family Homes Soared."

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