Owning a piece of American real estate is a dream that millions have had for generations. As affordable housing increasingly grows more challenging to afford, some may entertain the option of buying a condominium instead of a house. After all, a condo costs less. Right? Not necessarily.
When comparing the purchase price of a 3 bedroom 2 bathroom condo to the price of a 3 bedroom 2 bathroom house, also referred to as a single family residence (SFR), the comparable condo will likely have a lower price. However, most condos are managed by a condo association and result in having monthly association fees. These monthly fees can cost upwards of $800 or even higher!
Pros & Cons for Condos | Pros & Cons for House (SFRs) |
Pros: | Pros: |
Lower purchase price | Fee Simple (you own the land) |
Minimal maintenance | Privacy |
Location | Freedom |
Insurance premiums | Location |
Cons: | Cons: |
Expensive monthly association fees | Higher purchase price |
Less privacy | Exterior and yard maintenance |
Location | Commute |
Investors | |
If you’re in the market for a low-maintenance space with quick access to lots of local amenities and benefit from lower insurance premiums, a condo might be worth exploring. But if you crunch the numbers and find out that after monthly association fees, pet restrictions, and privacy is a tough pill to swallow, then also consider that other units within the association might be owned by investors.
We all know that homeowners are likely to respect the home a bit more than tenants. Lastly, condos are usually known as a leasehold property. This means that while the homeowner owns the unit, the association will own the land that the condo is built on. Additionally, if you’re using FHA or VA financing, be sure to consult with your real estate agent and confirm that it is on the FHA or VA approved condo list.
If you’re in the market for a home that you are excited about maintaining inside and out and own the land that the home is built on, then a single family residence (SFR) may be your best option. SFR’s have lower and sometime no association dues. They provide more freedom to manage the exterior and yard to the homeowner’s preference. They’re located just about everywhere and are in more locations than condo developments, and you don’t have to worry about neighbors above or below you making noise.
Purchasing a home is likely going to be the largest expense of your life. Spending time with your significant other and weighing the options is important before making such a commitment. Additional variables to consider are school districts (even if you don’t have children, different school districts may have higher property taxes than others) commute to your favorite shops, restaurants, and especially your place of work, internet options, i.e. fiber, etc…
While the cost of a condo may certainly seem less up front, it may be a different story after you factor in the association fees and other intrinsic costs that you and your family aren’t interested in living with.
Both are fantastic options for those who do their research, lean on a trusted real estate agent and lender, and understand the true benefits and challenges of the direction that they decide to pursue.
Which would you prefer?
Like what you're reading? Check out more articles like this at TheHomeLoanHub.com.
Terry Roberts, USMC Veteran | Sr. Mortgage Broker NMLS 397987 | E Mortgage Capital
Terry Roberts is a U.S. Marine Corps Veteran and specializes in residential mortgages, including new construction, conventional, FHA, and VA home loans. He has helped more than 10,000 clients start the home buying process across America.
Comments