Single-family homes aren’t the only game in town when it comes to homeownership, building wealth, or fulfilling the American dream. Condos are another great avenue to achieve all three.
Before you commit to the down payment, monthly mortgage payment, and competitive bidding associated with single-family homes, it’s a good idea to take some time to consider the pros and cons of investing in a condo.
Pros of Investing in Condos
1. More affordable than single-family homes
Condos generally have a lower price tag than single-family homes, though obviously there are exceptions. A fixer-upper home in a rural area will likely be cheaper than, say, a waterfront condo in an amenity-rich building.
Barring a similar scenario, however, condos generally have a lower sales price, especially for first-time homebuyers. Of course, the lower purchase price with this type of property often means a lower down payment as well!
2. Exterior maintenance included
When you buy a condo, you’ll be responsible for maintaining the interior of your unit. As with single-family homes, any repairs, remodels, or updates will be up to you.
However, a condo typically comes with a homeowners association (HOA) that is responsible for the upkeep, repairs, and maintenance associated with common areas, amenities, open spaces, walkways, parking garages, you name it.
Many homeowners are happy to pay a monthly HOA fee in exchange for not having to worry about all these items. Young professionals, families with young children, and empty-nesters often buy a condo for this specific reason.
This low-maintenance lifestyle also makes purchasing a condo attractive as a second home, vacation home, or even an investment property.
3. Amenities galore
Every condo community is different, but many condos come with amenities. From pools and barbecues to community rooms, fitness centers, and even concierge service, condo buildings can be stacked with lifestyle amenities that are both luxurious and convenient.
In some cases, you can find these amenities in single-family homes, but they come with a hefty cost. The same is true of gated single-family home communities. Some often mirror the amenities condos have had for decades, but those HOA fees can be very high.
4. You own it, you personalize it
The HOA may take care of community spaces and amenities, but the inside of the condo? It’s yours to do with as you wish.
Barring any specific rules and regulations associated with your homeowners association, you can do what you want with your unit’s interior. Paint, replace countertops, add crown molding, turn a bedroom into a yoga studio … you’re limited only by your imagination (and perhaps approval from the HOA for bigger remodeling projects).
This is also a huge advantage of owning a condo versus renting an apartment. With an apartment, you may get upscale amenities (emphasis: may), but the unit still belongs to the building’s owner. Should you choose to change anything, you’re required to revert it back to its original appearance before you move out, or you risk losing all or part of your security deposit.
5. The potential for supplemental rental income
Did your ears perk up when we mentioned purchasing a condo as an investment property? If so, then keep reading. Condos can make fabulous real estate investments for all the reasons stated above: lower cost of entry, maintenance included, and tons of amenities and customization options.
As long as your HOA allows it (be sure to check!), you’re free to rent your condo out on either a short- or long-term basis. Rent it out on a short-term basis—think Airbnb’ing it by the day, week, or month—and you can still enjoy living in the condo whenever you like.
Rent it out long term, and you have the potential to see your real estate investment appreciate while someone else pays the mortgage and possibly a little extra that goes straight into your pocket!
Cons of Investing in Condos
1. Homeowners association requirement
What’s a pro can also be a con … depending on your point of view. Buying a condo does come with the prerequisite of an HOA and HOA fees. These fees cover maintenance and upgrades and generally keep the property beautiful, but you are required to pay them monthly.
This cost is definitely something to consider, as the monthly payment needs to be factored into your budget when you’re purchasing a condo. HOAs also have rules and regulations that need to be followed or you risk a penalty.
2. HOA certificate
Lenders require you to purchase an HOA Certification that provides information on the development when you buy a condo. This typically costs between $100 and $250 and is nonrefundable.
Unfortunately, the information revealed in this certificate, such as a low occupancy, too many owners delinquent on their HOA dues, or pending litigation on the property, could prevent the lender from funding the purchase. (Psst: APM has programs for “non-warrantable” condos like these—ask us about them!)
3. HOA approval
Are you sensing a pattern here? HOAs may have their own rules and regulations, but other entities, including lenders, do as well.
If you have an FHA or VA loan, these organizations must approve the condo’s development and HOA. You can contact APM anytime to find out if your development is approved by the FHA or VA, or even request to get them approved if they’re not already.
Clearly, investing in condos—like any real estate investment—comes with a list of pros and cons.
Still on the fence? APM is happy to discuss your exact financial situation and goals, and then help you find a product that can make your dreams come true. Give us a call today.