Condo vs. House: Which to Buy and Why?

open house

Realty Q&A: “Condo vs. house.”

If you’re currently looking to buy a piece of property, perhaps to take advantage of the record low mortgage rates on offer, and also the reduced home prices, you may be torn between a house and a condo.

But which is the better buy and why? Well, it really depends on your unique situation and what your future plans are.

When buying property, which is a huge financial commitment, you must make a plan that looks many years into the future.

You can’t just think, “this house or that condo will be great for the next couple years, then I’ll sell it or rent it out.”

It doesn’t always work out as planned, so you need to consider the long term.

One piece of that plan is deciding which type of property to buy, as you’ll sometimes be torn between a condo and a house.

I’ve lived in both and can tell you that there are pros and cons to each, but can’t tell you with certainty that one is better than the other because it really depends on your personality and individual preferences.

Let’s explore condo and house differences to get a better overall picture.

Condos Are Cheaper

  • Many people buy condos simply because they cost less than a house
  • So for some it’s less of a choice and more a necessity
  • The decision may also be driven by location
  • With condos the more affordable option in central parts of town

Let’s start by looking at some of the advantages of buying a condo as opposed to a house.

The first huge advantage to buying a condo is that it’s generally going to be cheaper than buying a house, all things being equal. By that, I mean if it’s in the same location, the condo is going to be cheaper than the house.

So if you have a certain price ceiling or max loan amount you qualify for, houses in the area where you want to buy, such as the city, may be out of your range.

If that’s the case, you’ll probably have to look at condos instead. Or expand your target market to less desirable or farther out areas.

Assuming you don’t want to consider houses in the outskirts, or the suburbs, or wherever they happen to be cheap (by the freeway), you’ll probably have to search for a condo.

This is especially true if you want to live in an urban area, such as a city center that is walking distance to shops, restaurants, bars, and so forth.

In fact, there might be zero house options in the heart of any given city, so the argument might end right here if you’re set on being in the thick of the action.

Condos Are Easier to Maintain

  • The biggest advantage to a condo
  • Is that it’s easier to maintain
  • With a house you’ll constantly have things that need fixing
  • A condo is mainly a box with stuff inside you might need to maintain

Aside from condos being cheaper than homes, they’re also a lot cheaper and easier to maintain.

After all, your living space will be limited to a small interior unit, not a sprawling property.

So all you’ll really need to worry about are your appliances, plumbing, and whatever else you happen to have in your condo. This will make security a lot easier as well.

If you buy a house, you’ll need to worry about the structure itself, the roof, the exterior of the home, the landscaping, and much, much more.

With all those extra responsibilities come more money and more headaches, assuming things go wrong (which they probably will over time).

We’re talking a pool guy, a gardener, a security system, a big water bill, more furnishings to fill your large home, etc., etc. It can add up in a hurry and make a home really expensive, even if the purchase price was reasonable.

So if you’re not “handy,” or Bob Vila, a condo may be the better move. But if you’re Mr. or Ms. DIY, a house could be a fun, rewarding project for you.

I know lots of people who are better suited for a condo because they aren’t handy or outdoorsy. Think city dwellers.

I also know people who would never buy a condo because they demand privacy, space, and most importantly, land.

Just determine your personality upfront to avoid a huge misstep here.

Condos Can Be Outgrown

  • One drawback is condos are generally small
  • And are often outgrown if you have plans to start a family
  • The good news is they’re easy to rent
  • So it might be possible to hang onto it and turn it into an investment property

While the smaller living space may be easier to wrap your head around, it can easily be outgrown.

If you buy your condo alone, and later have a significant other move in, it may not be long before you’re married with kids on the way.

Assuming you want to start a family, you’ll probably have to begin shopping sooner rather than later for a house and a lot more room.

If you ever look at condo listings online, most of the time there’s a “kid’s room,” complete with a crib, toys, and brightly colored walls.

It’s not a coincidence. Many condo owners simply outgrow their properties, and make their move toward a house after a few years.

Sure, you can rent it out, but playing landlord doesn’t come without it’s own work. And selling your condo to buy a house may not provide enough upside for your subsequent down payment.

Still, if it all works out, you could have a cash-flowing condo and a shiny new home to live in, which can be a pretty sweet deal. Just take the time to screen those tenants!

[How much to put down on a house?]

Houses Are Better Investments

  • Generally homes appreciate more than condos
  • And there’s more opportunity to increase their value
  • Assuming you have space to make additions
  • Or add certain amenities like a pool, spa, etc.

Is a condo or house the better investment? Good question.

Typically, houses appreciate more than condos. Sure, there will be exceptions to this rule, but it’s generally expected that a house will increase in price at a faster clip than a condo.

This is clearly a plus if you want to make more money on your real estate purchase, which I believe everyone does.

Not only that, but you have more possibilities to put value into a home. With a home, you own the land it’s on as well. This means both the home and the lot can appreciate.

Additionally, you can build upon the structure. So if you have a good-sized lot, you can make your 2-bedroom, 2-bathroom house a three or four bedroom home. Or you can add a bathroom.

Assuming you get the work done at a reasonable rate and it’s high quality, your home could be worth a whole lot more.

With a condo, there isn’t a ton you can do to improve it. Sure, you can put in granite countertops, or tear out the carpet and put in hardwood floors. But there isn’t much more you can do beyond home staging and the superficial stuff.

So you’ll basically just have to hope the area you buy your condo in appreciates over time. This isn’t to say it won’t, it’s just that it’s mostly out of your control.

[Best and worst home improvements.]

The upside to a condo is that it can rented out pretty easily if it’s in a desirable area, and there should be less for you to worry about. After all, if it’s smaller and mostly self-contained (because the HOA handles the outside of the unit) there shouldn’t be too much do to as the landlord.

If something does break, there might already be a property management team in place, and/or a maintenance person on site to handle it.

A house can be trickier to rent out because a lot can go wrong in a house, and there’s generally no one around to jump in and help. More stuff means more potential problems that you’ll need to fix on behalf of your tenant.

And what do you do about ancillary services like pool cleaning, pest control, gardening, and so forth? Do you ask your tenant to continue to pay these bills to keep everything in good shape, or do you just hope they’ll maintain everything as you would?

Houses Don’t Have HOA Dues

  • Most single-family homes don’t have HOA dues
  • And if they do, they’re usually nominal
  • Condos are notorious for having very expensive dues
  • That can drive the price of your housing payment up considerably

Another huge downside to a condo is the associated HOA dues that must be paid each month to maintain the structure itself.

That’s right, you need to pay for things like landscaping, maintenance for the pool and common areas, and make sure there is enough money in the Association’s reserve account.

This has been a problem as of late thanks to all those foreclosures.

In Los Angeles, many condos have HOA dues north of $400-$500 a month. Clearly this can make your monthly housing payment a lot more expensive.

In fact, it’s so expensive that you could borrow nearly $100,000 more if you chose to buy a house.

And HOA dues never seem to do anything except go up, nor do they stop getting paid. So if you pay off your mortgage, you will stay have to pay this monthly fee for life.

With a house, you’ll still need to pay homeowners insurance and taxes long after your mortgage is paid off, but that’s unavoidable.

*Some homes may be part of a planned unit development (PUD) and charge HOA dues.

Of course, homes generally have the same costs, they just aren’t organized in a neat little package each month, and are instead paid à la carte to each vendor.

Houses Offer Privacy

  • If you don’t like shared walls
  • Don’t buy a condo
  • Houses offer much more privacy and ideally are less noisy
  • Though these days the lots are getting smaller and closer together

One thing I hate about condos is that they’re basically just apartments you own. In fact, your grandparents will probably refer to your condo as an apartment.

You still share common walls, floors, and common areas, meaning someone could be stomping around above you. Or blasting music all night long.

The units next to you may also be rented out, so you’ll never know who might move in next door.

Heck, even if your neighbors are more than pleasant you may get sick of them…it’s just human nature when you’re around someone else all the time.

Additionally, you get very little privacy with a condo as compared to a house, and a lot less space generally.

At the end of the day, you may want to come home and relax and not be bothered, but with a condo that might not be achievable if you can see and hear your neighbors while lying in bed.

There’s also the parking issue. Most condos come with tandem parking, which has got to be one of the most annoying setups in the history of man.

With a house, you can get peace and quiet, and sit out in your backyard if you need some fresh air. With a condo, you’ll need to head down to the common area, which may not be so peaceful.

There are also fewer rules with a home. If you want to buy a Great Dane, you can buy one. With a condo, pets may or may not be allowed. Or they might be limited to one dog or cat only.

[Common home buying mistakes.]

Houses Are Easier to Finance

  • It can be harder to finance a condo with a home loan
  • For one not all of them are FHA-approved if you need that type of loan
  • And your mortgage rate may be higher to boot
  • Homes generally don’t have such restrictions or pricing adjustments

If you couldn’t tell by now, I favor houses over condos. Another reason why is because houses tend to be easier to finance than condos.

Often times, there are restrictions regarding mortgage financing on condos. If there are too many investor-owned units, the lender may not want to extend a mortgage. The same goes if one person or entity owns too many of the units.

And many condo complexes don’t allow FHA loans and other special types of financing.

Even if they do, the mortgage rate may be higher with a condo, largely because condos carry with them more risk than a house, from the lender’s perspective.

So with a house, you’ll likely get a cheaper mortgage and have an easier time obtaining one.

All that said, you must look at your own unique situation and personality before determining which is better.

In some cases, the condo may be the better purchase. And in others the home will definitely be the better buy. So do your homework, make a plan, and shop around, extensively.

Tip: Also consider townhouses, which are a sort of hybrid between a house and a condo and a good middle ground for those who can’t decide.

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