Condo Buying Guide: Reasons to Buy a Condo
If you’re thinking about buying a new home, a condo can be a smart choice. Often, they are cheaper than single-family homes, and they may offer conveniences – such as swimming pools and fitness centers – that you couldn’t otherwise afford. Here’s a rundown on some of the top reasons to buy a condo.
Condominium developments often provide access to certain amenities that wouldn’t be practical or affordable for an individual house owner. Clubhouses, golf courses, swimming pools, tennis courts, fitness facilities and even the actual location – such as a beachfront property – can be much more affordable when shared by a group of owners, rather than by an individual property owner.
Many developments offer a strong sense of community, especially those that provide a variety of planned social events. Keep in mind, however, that if your development has a relatively high number of units on a rental program, the sense of community can be less pronounced as new people (short-term renters) come and go on a regular basis. If a sense of community is important to you, be sure to find out ahead of time how many units are owner-occupied.
While a single-family home might be out of reach in a luxury location, such as a ski town or the beach, a condo can be a viable alternative that provides you with the lifestyle you enjoy at a fraction of the cost. Single-family homes at a popular beach location, for example, might demand prices in the millions of dollars. A condominium unit on the same stretch of beach could be half or even one-third the cost. Of course, HOA fees will add to your costs, so be sure to run the numbers to get a true cost comparison.
Equity and Tax Advantages
If you’re deciding between renting a property and purchasing a condo, note that ownership presents two financial advantages over renting: the opportunity to build equity and the ability to take advantage of tax deductions for mortgage interest and property taxes. If your monthly mortgage payment would be about the same as rent, it may be financially advantageous to buy instead of rent. Check out Trulia’s Rent vs. Buy Calculator to compare renting and buying in your market. (For more, see Top Tax Advantages of Buying a Home.)
Some buyers will be interested in purchasing a condo as an investment in hope that the price of the unit will appreciate over time and/or to use the home as a source of rental income. Since condos tend to appreciate more slowly than single-family homes, many people who are interested in the unit as an investment will choose to capitalize on its rental potential rather than wait for the unit to go up in value.
Beachfront condos, for example, may fetch many thousands of dollars per week during the summer vacation months. Similarly, condos located at ski resorts can bring in similar rental fees during the winter months. If a unit has previously been on the rental program, the seller should be able to provide details regarding its annual rental income, including the number of days per year on average the unit has been rented and the rental fees that have been collected. (See Top 10 Features of a Profitable Rental Property.) The rental income during the high season may pay a whole year's maintenance costs, giving you free use of the property during the rest of the year, as well as some side income.
One of the biggest perks of owning a condo is that the individual owners are not directly responsible for maintenance on the building, common areas or grounds. For many people, this is desirable because it frees up time for other pursuits. For others, it is a well-earned break following many years of home maintenance. In general, your monthly condo fee covers all expenses related to the repair and maintenance of central services, parts of the building (aside from the individual units), grounds and community facilities.
Depending on your market, price may be a deciding factor in choosing a condo over other types of real estate, such as a single-family home. In certain areas, single-family homes may be predominantly larger and more expensive, while condos are smaller (either in terms of square feet and/or the number of bedrooms) and more affordable. Of course, this doesn’t hold true in all markets, and you should also factor in HOA fees when comparing costs.
Something else worth mentioning: Some markets (like Manhattan) have lots of co-ops, which are much more complicated to buy and sell, and generally more restrictive in their rules (remember – you don’t actually own a co-op, you buy shares in the corporation that owns it). In exchange for their relative ease of ownership, condos may sell at a premium in these markets. In New York City, for example, a condo can cost 30% more than a comparable co-op.
A condo offers a great deal of flexibility – it requires less maintenance than other types of homes and it’s easier to leave vacant while you travel. Condos can also provide more flexibility in terms of finding renters while you’re away. In New York City, for example, co-ops generally strictly limit or forbid subletting, which means if you’re on a six-month sabbatical, you may not be able to recover any of your housing costs during that time. Condos are typically much more flexible about this, which makes them attractive to snowbirds and other frequent travelers who might want to rent out their homes while they’re away.Condo Buying Guide: Choices When Buying a Condo