Guide to Buying a Condo: Pros and Cons of Buying a Condo

A condominium, commonly known as a condo, is an individual residential unit that is usually part of a larger building complex with shared community spaces. Condo owners can live inside of their unit or rent it to tenants. Condo owners buy a condo in the same way that someone buys a home: By depositing a down payment, paying closing costs, and paying a mortgage to build equity. A condominium may have shared spaces like a garden, a gym, laundry rooms, or a pool, but condo owners only own—and are entitled to renovate—the space inside their unit.

Many condos are governed by an organization, like the homeowners association, that sets ground rules for the building and performs maintenance. This organization charges a monthly fee for its services, which can include maintaining amenities like pools, gyms, and tennis courts, landscaping, roof repairs, and other building maintenance, and resolving neighborly disputes.

There are several factors to consider if you’re thinking about buying a condo:

1. 1. Your finances: When shopping for a condo, you’ll want to consider your personal finances. Is your credit score strong enough to secure a loan with the lowest interest rate? Do you have enough money set aside to pay a down payment, closing costs, and real estate agent fees? Is your income sufficient to cover monthly mortgage payments, condominium association fees, homeowners insurance, and property taxes? The answers to these questions can help you decide if condo ownership is right for you.
2. 2. Your lifestyle: Living in a condo is much more similar to apartment living than private home living. If you’re interested in lots of amenities with less maintenance, a condo may be right for you; if you’re more interested in privacy, a single-family home or townhouse may be a better option.
3. 3. The building’s history: The condominium complex itself is a major factor when buying an individual unit. If many units have foreclosed in recent years, it may mean that more building fees will fall to reliable renters to make up for the defaulters. If multiple units have all gone up for sale recently, it may be a sign that the complex isn’t a great place to live. The complex’s history will also be a significant factor in your lender’s decision to grant you a loan.
4. 4. The condo association: The experience of living in a condo is strongly determined by the condo association or the complex’s community association (similar to a homeowners association or HOA) that helps manage the building and allocate funds. Well-run condo associations can make the complex a better place to live by staying on top of maintenance and repairs, creating reasonable rules and regulations, and even organizing group get-togethers. Poorly-run condo associations may fall behind on maintenance, enforce strict housing regulations, and saddle tenants with surprise fees.

There are several potential advantages to buying a condo:

• Lower price: Condo units are typically less expensive than single-family homes, townhouses, or other forms of real estate ownership, so they’re a popular choice for first-time homebuyers who are not ready to financially commit to a sizeable down payment or steep mortgage rate. In addition, condos usually have lower property taxes than other types of property.
  
• Less maintenance and upkeep: When you buy a condo, most of the exterior maintenance is done by the property management company or condo association—including landscaping and mowing, roof repairs, snow removal, and amenity upkeep. In addition, the costs for these maintenance tasks are spread out among all condo owners on the property, meaning it can be much cheaper than equivalent duties in a single-family home.
• Access to amenities: Condos usually come with many community amenities and perks that tenants share—these can include clubhouses, firepits, swimming pools, parks or playgrounds, tennis courts, fitness centers, and dog parks.
• Built-in community: With several tenants living nearby and sharing common spaces, condominium buildings often have a more built-in sense of community. Complexes with active condominium associations may plan group get-togethers or activities to bring the condo community closer.
• Easier to rent out: Condos can be easier to rent to other families (or even resell) if you decide to move out since they have a built-in association and property manager. It’s also accessible to market condos to potential renters since they come with so many amenities and are usually cheaper to rent than single-family homes.

There are several potential disadvantages to buying a condo:

• Less privacy: When you live in an individual unit like a condo, you’ll share walls, a floor, or a ceiling with other tenants in the building, so you have less privacy in your home than in a freestanding single-family home. In addition, you’ll be sharing common areas and amenities (including stairwells and hallways) with other condo owners.
• Potential restrictions: Condominium complexes operate under a condo association, and new condo buyers will automatically become members of the association. They must abide by the association’s rules—anything from quiet hours to requiring a particular waste management schedule. In areas with strict COAs, homeowners can feel stifled by narrow design parameters or stringent upkeep policies.
• Condo association fees: When you buy a condo in a complex and become a member of the condo association, you’re required to pay a monthly fee to the association, which the elected condo board uses to make improvements. These COA fees can range from $200 to $600 and often depend on how well the association is managed. Disorganized condo associations can struggle to save funds and charge tenants many “special assessments,” or extra condo fees, to pay for larger projects that the association’s reserve fund won’t cover.
• More hurdles to a mortgage: Potential condo owners have a few extra obstacles to overcome when trying to secure a mortgage since lenders will also consider the condo development and how well it’s designed and maintained, in addition to your personal finances and credit score.

All you need is a MasterClass Annual Membership and our exclusive video lessons from prolific entrepreneur Robert Reffkin, the founder and CEO of the real estate technology company Compass. With Robert’s help, you’ll learn all about the intricacies of buying a home, from securing a mortgage to hiring an agent to tips for putting your own place on the market.