Should You Buy a Condo or Rent? How to Decide if Condo Ownership is Right for You
Living in a condo community has distinct advantages, but is it better to enjoy them as a renter or an owner? When considering a condo, buying vs. renting is one of the biggest early decisions a home seeker will have to make. Each option has its pros and cons, and each individual may weigh the factors differently. To help you decide whether to buy or rent a condo, keep reading for an overview of some of the most important aspects to consider.
Consider Rent Costs vs. Mortgage Payments
There is always a trade-off in terms of the advantages of paying rent or committing to a long-term mortgage. However, even though buying is often considered the more expensive option at first glance, the actual monthly financial commitment may be surprisingly similar. A mortgage calculator can help buyers determine what their monthly payments are likely to be. If the buyer intends to remain in the residence for an extended period of time or plans to hold onto the condo after moving to another area, the financial commitment of a mortgage may even be more affordable in the long run. An online buy vs. rent calculator can help buyers find out the specifics for their area.
Qualifying for a mortgage, with the associated down payment and closing costs, requires a more serious financial outlay initially than renting, but there are mortgage options and ways to acquire down payment funds that can help homebuyers become homeowners.
In addition, renters might reasonably anticipate higher rent charges with each new lease term in an appreciating real estate market. Assess these potential costs, fees, and additional charges, and weigh the relative value of those figures.
Owning a Condo Builds Equity
Just as owners of single-family homes build equity and benefit from rising real estate prices, condominium owners reap similar advantages. Renting a condo does not offer the same benefits.
Condominium owners hold title to an individual unit and, depending on the strata corporation documents that govern such ownership, each owner can not only use the condo as a primary residence, but loan it to another person, lease it, or transfer ownership to a family member. There are additional options that you might want to investigate.
All the rights and privileges of homeownership apply to condo ownership. That is a distinct advantage, not only related to flexibility of living, but also in terms of investment. Ownership builds equity as the mortgage is paid down. And as an owner, there are options. In a hot real estate market, leasing a condo to provide additional income can be a distinct advantage.
Owners have an option to sell the property and regain not only the original price but also any additional equity. Real estate ownership is a proven way to build a nest egg for the future, and also a way to diversify an investment portfolio.
If You Own a Condo, You Can Rent It Out
Unlike signing a lease for a rental unit, purchasing a condo requires no specific residency requirement. An owner may inhabit the property, lease it to a third party, or even (depending on the specific strata documents) use it as a short-term rental unit. That can be a definite advantage in a prime vacation area.
Before deciding that is an option, however, an owner should check the strata documentation thoroughly to determine what is allowable and what, if any, specific requirements might pertain to such rentals. Some condo associations provide management services for such short-term rentals, but other associations might require an outside marketing or rental agency and additional fees might be required.
Owners of condos in popular vacation spots have full use of their units at any time they wish, but the condos can be rented out to help pay the mortgage. Owners might want to determine if there are maximum rental nights allowed, or if there is a requirement for minimum use by the owners or their guests. Buying a condo with the intent of making a profit from rental fees is also not always a sure thing, so it's wise to prepare a spreadsheet of anticipated costs and income over a 12-month period to help weigh the merits of the plan.
What's More Affordable in Your Area?
While some people tout that renting is always less expensive than owning or vice versa, the reality of the matter is that it depends on where you live. If you live in a major city, owning will almost always be more expensive than renting. Meanwhile, if you live in the suburbs, renting is commonly going to be more expensive than buying a home. And if you want to move to a rural area, you may not even have the option to choose, as rental opportunities can be extremely hard to come by.
If you have a tight budget, you'll need to do some research on your area to find out how to get the most bang for your buck. When deciding, you will also need to account for down payments and additional fees that come with purchasing a condo. While a $1,000 mortgage may seem great, it can be easy to overlook how that price is only achievable under the best possible circumstances.
Regardless of your ultimate preferences, it's important to take the time to determine which choice is the better financial decision for you at this time.
Maintenance Responsibilities as Owner vs. Renter
Ownership of any real estate entails certain additional costs and responsibilities. Taxes, utilities, routine maintenance and upkeep, unexpected repair costs, property and liability insurance, seasonal preventive maintenance, and weather-related losses may necessitate additional expenditures that would not be the responsibility of a condominium renter. However, one of the benefits of living in a condo community is that exterior maintenance and maintenance of common areas and other amenities are generally taken care of by the community association, meaning that condo owners have fewer maintenance responsibilities than owners of single-family homes.
While renting may seem simpler, renters also don't share any part of the appreciation in value that owners enjoy.
Weigh the Pros and Cons of Owning vs. Renting a Condo
Whether the intent is to establish roots by buying a condo in a desirable urban location or gain a personal vacation retreat that might also have the potential to generate future income, carefully consider the options and weigh the merits before moving ahead. Be certain to investigate available options and obtain satisfactory answers to all your questions prior to signing a contract, whether it's a purchase contract or a lease agreement.