What is a condo?
Some people find it unsettling to think of having to maintain a whole house and yard, and the expense of a single-family home these days might make your pocketbook shudder. Fortunately, there are a variety of properties available that require less maintenance and are also more reasonably priced. Condos are one of those choices.
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What exactly is a condo, then? Is it wise to get one? Continue reading to learn about the benefits and drawbacks and determine if condo living is appropriate for you.
What is a condominium?
A condominium is a privately owned single unit inside a complex of other units. The term “condo” is frequently used to refer to this type of property. The inside of a condo is typically owned by the owner, as are the external wall components. Shared common spaces in the complex, such elevators, garages, pools, and outdoor gyms and halls, are owned equally by the condo owners. While detached condominiums are available in some regions, some condos are located in high-rise buildings.
According to Atlanta real estate broker Holly Leonard of Haven Real Estate Brokers, “a homeowners association typically manages the common areas and oversees the covenants, conditions, and restrictions that apply to the property.” The HOA’s regulations are outlined in the covenants, conditions, and restrictions, or CC&Rs. According to Leonard, condominiums are frequently referred to as “common interest developments.”
Why invest in a condo?
The answer to this question is straightforward for a lot of consumers. You simply need to maintain the interior of your unit in the majority of condo projects. A seasoned management organization takes care of everything else. There isn’t a grass to mow, flowerbeds to tend to, or snow to clean off roads. Older homeowners, those who travel frequently, and people who generally don’t want to spend time on maintenance may find this to be very helpful.
An additional crucial component is the price tag. Single-family houses have always been more expensive than condos, and this pattern is still present today. The typical price of a condo in May 2022 was $355,700, which is much less than the $414,200 median price of a single-family house, according to the most current statistics from the National Association of Realtors (NAR). Additionally, condos often have lower property taxes: A lower valuation results in a lower local government charge.
Additionally, condos offer a sense of community that single-family houses sometimes lack: shared facilities, gathering places, and more. With the assurance that everything would be taken care of once you close the door, it’s much simpler to take off and pursue travel or live temporarily somewhere else. Those who are empty nesters or single homeowners may find this particularly appealing.
Investing in a condominium
Condos are frequently purchased as rental properties. Condos may be excellent investments, especially in areas with high rental demand or those with significant tourist traffic. If you’re considering going this way, please keep in mind the tax implications, tactics, and best practices when purchasing a rental property.
Effects of the housing market on condominiums
Condo prices have increased in pace with single-family house prices because of the present dearth of available housing inventory. According to NAR, the price of condos has increased by over 14% since a year ago; this growth is nearly equal to that of single-family homes as a proportion of the purchase price. Therefore, the demand for condo living is remains strong even in the face of epidemic stories about people moving from cities to spacious houses in the suburbs.
Pros and drawbacks of condominium living
When comparing condo mortgage rates, it’s critical to consider more than just the upfront costs—in addition to the advantages and disadvantages of the lifestyle. Here are a few key points to think about.
Advantages
Lower-maintenance living: Living in a condo means that you won’t have to shovel snow, rake leaves, or mow the grass because the HOA takes care of most, if not all, of the exterior upkeep.
Feeling of security: Condos are more difficult to enter from the outside than single-family homes or townhomes, and some have security personnel on duty. A doorman or concierge, secure parking, and other features that boost security and safety are features of some. This may also be advantageous if you have irregular hours or travel a lot. According to Leonard, “living in a condo makes them feel safer because many single people dislike living alone.”
Possibilities for socializing: A lot of homeowners associations have get-togethers, including barbecues, pool parties, and playdates with dogs. Furthermore, you are more likely to meet your neighbors in person since you see them in passing. According to Leonard, “condos are a great place to meet people.”
Affordability: Compared to single-family houses, condominiums are typically smaller and need less land, making them a more cost-effective option for property ownership. Additionally, property taxes are often lower. Because they don’t require the same level of care and upkeep as a detached house, condominiums are a great option for first-time purchasers who still want to develop equity and enjoy the perks of ownership.
Features: The expense of using first-rate features such a dog park, covered parking, business center, swimming pool, clubhouse, and BBQ area is split among all condo owners. These features vary depending on the particular complex.
Cons
HOA rules: One of the main grievances with condo living is that HOA regulations may be onerous, imposing obligatory guidelines on everything from noise and garbage collection to the kinds of things that can be kept on your patio and the number of dogs you are allowed to have. You may also be required to pay a penalty if you disregard HOA regulations.
Investment risk: The value of your apartment depends on the value of every other property in the complex being intact. Comps are crucial in real estate, and if one in your building is underestimated, yours may be the next. Because you share ownership with other tenants in the building, investing in a condo might be riskier, according to Leonard. “Your value may suffer if someone forecloses or short sells their condo.”
Higher interest rates: To offset the increased risk associated with owning a condo, lenders often demand somewhat higher interest rates for loans to purchase one.
Lack of privacy: Since condos share shared spaces, you will inevitably have to socialize with your neighbors. Most likely, you’ll hear them too. You could be forced out of bed by your above neighbor’s early morning footsteps if they have to get at work.
Restricted outdoor area: Condos typically build higher to optimize available real estate, which frequently results in less outdoor or green space.
Growing HOA dues: In order to cover maintenance expenses and any newly added facilities, HOA dues often increase over time. HOA dues should be taken into account when creating your home budget, particularly in more costly real estate markets.
Special assessments: Condo associations have the authority to impose special assessments on all homeowners in addition to the usual monthly dues in order to cover unforeseen costs or even the cost of additional facilities. For instance, you could have to pay an unforeseen expenditure if the roof has to be repaired.
Strict rental regulations: When you purchase a unit in a shared building or community, you agree to abide by the rules, some of which may restrict the number of units that may be rented at one time. Furthermore, find out if the organization will permit any apartments to be placed on short-term rental websites such as Airbnb. Some want to restrict the number of outsiders who may check in each night.