What Is A Condo? Pros & Cons For Homebuyers | Bankrate (2024)

For some home hunters, the thought of maintaining an entire house and yard conjures up a bit of anxiety — and the cost of a single-family home these days can send shivers down your budget’s spine. Luckily, there are different kinds of properties to choose from that don’t entail a lot of upkeep, and come at a more reasonable price to boot. One of those options is a condominium.

So what is a condo? Should you buy one? Read on to get a sense of the pros and cons, and whether condo life is right for you.

What is a condominium?

A condominium, often shortened to simply “condo,” is a privately owned individual unit within a community of other units. In general, the owner usually owns the interior of their condo and the structural components of exterior walls. Condo owners jointly own shared common areas within the community, such as pools, garages, elevators and outside hallways and gyms, to name a few. While some condos are found in high-rise buildings, detached condos can be found in some markets.

“A homeowners association typically manages the common areas and oversees the covenants, conditions and restrictions that apply to the property,” says Holly Leonard, a real estate agent with Haven Real Estate Brokers in Atlanta. Covenants, conditions and restrictions, or , lay out the HOA’s rules. “Condominiums are often referred to as a ‘common interest development,” Leonard says.

Why buy a condo?

For many buyers, the answer to this question is simplicity. With most condo developments, you only have to take care of your home’s interior. All the rest is handled by a professional management company. There’s no lawn to cut, flowerbeds to maintain or driveways to be cleared of snow. This can be especially beneficial for older homeowners, folks who travel often or those who otherwise don’t want to spend time on maintenance.

Another important piece is the price tag. Condos have historically been more affordable than single-family homes, and that trend continues today. According to the most recent data from the National Association of Realtors (NAR) the median price of a condo in May 2022 was $355,700 — much lower than the $414,200 median price tag of a single-family home. Condos tend to be cheaper in terms of property taxes, too: A smaller valuation means a smaller bill from the local government.

Condos also provide a community life that single-family homes often don’t provide, including shared spaces and amenities, events and more. It’s a lot easier to take off and pursue travel or live seasonally in another area with the peace of mind of knowing that once you lock the door, everything will be taken care of. This can especially be a draw for single homeowners or empty-nesters.

Buying a condo as an investment

Many buy condos to use as a rental property. Condos can make great investments, particularly in neighborhoods with lots of renters or in locations with heavy tourism. If you’re thinking about taking this route, just remember to consider the tips, tricks and tax considerations of buying a rental property.

How the housing market impacts condos

Thanks to the current shortage of housing inventory, condo prices have risen in line with those of single-family homes. Condos are more than 14 percent more expensive today than they were one year ago, according to NAR — an almost identical increase with single-family homes in terms of percentage of purchase price. So, despite the pandemic headlines about people fleeing cities for large homes in the suburbs, demand for condo living is still alive and well.

Pros and cons of living in a condo

If you’re ready to compare condo mortgage rates, it’s important to also weigh the benefits and drawbacks of the lifestyle, not just the price you’ll pay to move in. Here are some top things to consider.

Pros

• Lower-maintenance living: Since most, if not all, exterior maintenance on condos is handled by the HOA, living in a condo means no shoveling snow, no raking leaves and no mowing the lawn.
• Sense of security: Some condo communities have security staff, and the entrances are more difficult to access from the outside than single-family homes or townhomes. Some have secure entrances and parking, a doorman or concierge and other amenities that increase security and safety. This can also be a perk if you work odd hours or travel frequently. “Many single people do not like living alone, and condo living makes them feel safer,” Leonard says.
• Socializing opportunities: Many HOAs organize social events like pool parties, barbecues and doggy playdates. In addition, because you see your neighbors in passing, you’re more likely than not to meet them in person. “Condos are a great place to meet people,” says Leonard.
• Affordability: Because condos tend to be more compact and require less land than single-family homes, they can be a more affordable way to own property. Property taxes tend to be lower as well. For some first-time buyers, condos make ideal starter homes precisely because they don’t have the upkeep and maintenance of a detached home, but you can still reap the benefits of ownership and building equity.
• Amenities: Depending on the condo community, you may have access to top-notch amenities like a barbecue area, business center, swimming pool, dog park, covered parking, clubhouse and more — and the cost of enjoying these perks is shared among all residents.

Cons

• HOA rules: One of the biggest complaints about living in a condo community is that HOA rules can be restrictive, providing mandatory guidance on everything from trash pickup and noise to what types of items may be stored on your patio and how many pets you can have. If you fail to follow HOA rules, you might have to pay a penalty, too.
• Investment risk: Your condo’s value hinges on all the others in the community also maintaining their value. Real estate is all about comps, and if one of the comps in your building is undervalued, yours could be next. “Condos can be a riskier investment because you are sharing ownership with other people in the building,” Leonard says. “If one person forecloses or short-sells their condo, it can take a toll on your value.”
• Higher interest rates: Since condos come with the potential for issues from other owners, lenders tend to charge slightly higher rates for loans to buy one to compensate for that elevated risk.
• Lack of privacy: Condos share common areas, so you’re going to have to regularly interact with your neighbors. You’ll also likely hear them. If your upstairs neighbor wakes up early for work, those footsteps might drag you out of bed, too.
• Limited outdoor space: Condos usually maximize real estate by building up, which often means there is limited outdoor or green space.
• Rising HOA fees: HOA fees generally go up over time to address maintenance costs and any added amenities. It’s important to factor the cost of HOA fees into your homebuying budget, especially in more expensive housing markets.
• Special assessments: In addition to regular monthly fees, condo associations can enact special assessments on all homeowners for unexpected expenses, or even for new amenities. For example, if the roof needs to be repaired, you might have an unexpected bill to cover.
• Restrictive rental policies: When you buy into a shared building or community, you commit to following the rules, which might prohibit how many units can be rented at any given time. Additionally, do your research on whether the association will allow any units to be listed on short-term sites like Airbnb. Some aim to limit the opportunity for strangers to check in every night.

Comparing condominiums with other housing types

Condo vs. apartment

Structurally, condos and apartments can look the same, but the key difference between a condo and an apartment is ownership: You own a condo, and you rent an apartment. (In some markets, like New York City, however, you can buy an apartment.)

Both kinds of dwellings are typically found in buildings with multiple floors and units on each, with shared amenities and common areas, such as a lobby, gym and parking. In some communities, condo owners can rent their units to tenants, too.

Condo vs. townhome

Like condos, townhomes or townhouses are located close together, so you’ll get to know your neighbors fairly well. Townhouses also often involve membership in a homeowners association, but the amenity might be a central clubhouse rather than all the in-building amenities that come with a condo.

Townhomes tend to be bigger than condos, though, sometimes featuring multiple-floor designs and private yards and/or garages. So, in a townhome, you might get more space, but you might also get more maintenance work.

Condo vs. house

If you live in a condo, it’s your home, but it’s not a house. That’s an important distinction, particularly when it comes to maintenance.

Consider a detached single-family house whose roof needs to be repaired. As a homeowner, that expense would fall entirely on your shoulders. If you owned a condo, though, the cost of roof repair would likely be split between other owners in the community, and a portion of it might also be paid for via the reserves of the homeowners association.

Sharing expenses can be helpful, but it’s important to note that condo owners often must follow additional rules. For example, there could be aesthetic requirements to adhere to, such as a mandate to install the same windows or mailbox as every other unit. Simply put, you might not have complete control over the decisions about your condo, whereas with a house, you have control over pretty much everything.

Different types of condos

There are plenty of different types of condos. Some might be located in high-rise elevator buildings with hundreds of other units, and others are in small walk-up buildings with just a few other units. Some are in grand old buildings, and there are always plenty of new condo developments breaking ground in large cities across the U.S.

Should I buy or rent a condo?

Your finances will be the main deciding factor that answers this question. As with any home type, when you buy a home, you’ll need a large sum of money for a down payment, as well as closing costs. If you plan to own the condo for enough time to justify paying the closing costs — which can add up to thousands of dollars — buying can be a smart move.

If you’re unsure of how long you actually plan to stay, renting a condo can be a good opportunity to test out a particular building or area of town before making a long-term ownership commitment.

Find other housing types and styles

Bottom line

Whether you’re looking for a starter home that can eventually help you move into a bigger space or you’re thinking about hanging on to the unit as a long-term investment, buying a condo can be a great decision. However, condo living isn’t for everyone. To figure out whether it’s a smart move for your own finances and lifestyle, talk to a real estate agent to get a sense of what you can expect to pay today in the local condo market and the future outlook for prices in your area.

Condo FAQs

• A condo, or condominium, is one unit that is part of a larger building or community of other condos. When you own a condo, you own the space in your own unit. Common spaces — enentrances, lobbies, hallways, rooftop decks and other shared areas — are the property of the condo association.

• The reason that condos are generally cheaper than single-family homes comes down to space: Condos typically offer less square footage than a standalone home. Plus, condos don’t typically have yards, so you simply don’t get as much private space as you do with a house. While a condo’s price tag tends to be more affordable than a home in the same area, they do usually come with other costs, like monthly homeowners association dues.

• In most of the country, condos are typically owned, whereas apartments are typically rented. So yes, condos tend to be more expensive than apartments due to the difference in ownership: You need to pay a down payment, a mortgage, property taxes and more. However, owning a condo does come with the benefit of building up equity, and you may even be able to find an FHA-approved condo, which will require a much smaller than usual down payment.

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  The Pros & Cons of Buying a Condo​ | Extra Space Storage

• The biggest downside to buying a condo is a lack of privacy. Since you share common spaces with other residents in the building, you’ll see your neighbors frequently. Plus, you’ll likely hear them, too, since you share walls with them. Another drawback is that you will have to follow rules that govern the entire building, which can control everything from the type of pets you’re allowed to own to the type of windows you’re allowed to install.