So you’re ready to ditch renting for the equity and security of homeownership, but you still like the amenities, convenience, and comfort of the apartment lifestyle. A condominium (condo) could be right for you. Let’s look at their features.
What Is a Condo?
A condo is considered a single-family residence, just like a regular home, but it’s typically part of a larger development where you share the buildings, amenities, and common areas with other homeowners. Condos have a board or association of owners who govern how the property is operated, set guidelines, and oversee upkeep of common areas.
Condos come in all shapes and sizes, from high-rise buildings to townhomes to detached units.
Generally, as a condo owner, you own “from the building’s studs, in.” That means you have complete control over the inside of your condo. The common areas (“from the studs out”) include things like the roof, landscaping, and parking lots, and these are paid for with monthly fees managed by your homeowners’ association (HOA).
Pros and Cons of Condos
Condos are a great option for buyers looking for an urban location, amenities like pools and gyms, and freedom from maintenance of exterior spaces (no mowing required!). Here are some other benefits:
- Condos tend to be less expensive than traditional homes because they’re smaller and don’t come with land. You only own the unit.
- As a homeowner, you can enjoy long-term equity and possible tax deductions. Homebuyers who are downsizing or retired choose condos because there’s less space to manage, and there may be activities specifically catered to their needs.
- You can decorate the inside of your unit as you please.
- Many condos have security features like cameras, doormen, or guard services. Living among a group of neighbors can also provide a sense of safety knowing help is always nearby.
- Condo buildings must have a master insurance policy that covers the entire development from disasters such as fires, tornadoes, or floods.
Now for the cons:
- Monthly HOA fees can be costly, so you need to be sure you can afford them. Also, your lender will calculate those fees into your loan amount, so that may affect how much you can borrow.
- Although your HOA fees cover exterior upkeep and maintenance, you’re still responsible for your own repairs—and goofs. If your sink backs up from the toy your son dropped into it, you’ll have to cover the cost.
- With condos, you share walls with your neighbors, so you might encounter noise and other bothersome habits.
- Condos have rules about pets (if they’re allowed at all), pool hours, and even whether you can leave your bike on your balcony. Which brings us to…
- Storage—there isn’t much of it, if any. You likely won’t have attic or basement space, so you’ll need to store items in your unit’s designated space or bin, or off the property.
- Parking is typically limited. You might have an assigned space, but guests will usually need to park elsewhere.
While HOAs can seem strict, it’s their goal to keep everyone in harmony and take care of the development as a whole. If your neighbor keeps junk in their yard, it could negatively impact your home’s value and make selling your home more difficult.
There are a few additional considerations to condo loans as opposed to traditional homes. If you’re getting a FHA Loan, the development must be listed on HUD’s FHA-approved condo list. The FHA has a list of criteria that a condominium must meet before homebuyers can purchase or refinance a unit with an FHA loan.
Conventional loans also have requirements, one being at least 50% of the units in the building must be owner-occupied as a primary residence or second home.
As you shop, be sure to ask:
- What are the condo fees?
- Are there cash reserves? Most condo associations have cash reserves in case a big project, like repaving the parking lot, comes up. If there isn’t a decent reserve budget, you could end up paying a lot out of pocket.
- Do most owners live in their condo or rent it out?
If you think condo living could be for you, we are here to help you every step of the way! Contact us and let’s get started!