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If you're considering buying a home, one of the most important decisions you will have to make is whether you should buy a house or a condominium. With the condo market being so prevalent in today's society, more people are inevitably deciding to buy condos rather than homes.
However, before making your purchase decision, there are many things you need to consider. This decision can be more difficult because there are many misconceptions about condos. Let's take a moment and explore what a condo is, the key differences between condos and homes, and how they compare to each other.
Condos Explained
A condominium (or "condo") is a luxury apartment-like living space that comes with both ownership and responsibility of the unit. Condos usually consist of one floor, which means you don't have to worry about maintaining a yard or exterior walls.
Condos are usually more extensive than apartments, and they come with many amenities that are typically not included in an apartment complex. Some of these amenities include pools, fitness clubs, etc.
Upon closing the purchase agreement for a condominium unit, you will be required to pay at least part of the down payment to secure your unit. You will also be required to pay an administrative fee which covers the cost of setting up and closing out the condo association.
You may also need to pay for a professional inspection, so it's best to check with your realtor about any other fees that you will be responsible for when purchasing a condo.
Types of Condos and Homeownership
There are two main types of condos: "fee simple" and "leasehold."
Fee-simple units give the owner exclusive property rights, including the right to sell, lease, or pass it on to heirs. This type of ownership is common in upscale condos and is the same as owning a house.
Leasehold ownership of a condo is associated with timeshare concepts. Usually, it gives all rights to the condo association, which means they have complete control over who buys and sells the unit.
The Financial Differences Between Homes and Condos
The financial differences between homes and condos are very significant. You must pay property taxes and homeowners insurance when you purchase a home. You will also need to maintain the unit's exterior, including roofing maintenance and yard work.
When buying a condo, most of these costs are included in your monthly fee. The funds paid by the condominium owners go toward creating and upkeep of shared areas within the complex. These funds are used to repair exterior parts of the building, maintain common areas, pay the property manager, etc. Condo owners do not have to worry about paying for these things themselves because it is included in their monthly maintenance fees.
Condo fees are monthly payments made by the owner(s) of a condominium to the condominium corporation. They cover the costs of building upkeep and administrative expenses, including infrastructure, insurance, janitorial services, electricity usage, etc. Many condos will include utilities in their monthly fee, while others may be extra.
Of course, there are also financial advantages to buying a home compared to buying a condo. When you purchase a home, the mortgage is tax-deductible. Conversely, while interest on a condo can be deducted, some limits reduce or eliminate it if the funds were used to buy furniture for that unit (see IRS Publication 530).
Equity in your home can also grow over time, while equity in a condominium will likely remain stagnant since the associations' fee structure will tend to stay flat.
Consider the following:
- Location - Consider the condo's location and how it will impact your daily life or lifestyle.
- Size of the condo - Make sure it's big enough for your needs. Pick a size that is comfortable for you.
- Amenities - Look at what amenities are included in the condo complex and whether they are essential to you - parking space, storage spaces, pool, etc.
- Budget - Don't forget to consider your budget when making your purchase. Be realistic about what you can afford to avoid overspending.
- Legal Issues - Be sure to ask about any legal issues associated with the property before buying it.
- Maintenance Fees - Find out how much the monthly maintenance fees will be and whether you can afford them.
Conclusion
Condos can be a desirable option compared to renting an apartment or buying a house. However, each condo has its pros and cons depending on your lifestyle and financial situation.
If you are interested in buying a condo, make sure you find out all of the costs and fees associated with your purchase. Before making any decision, it's essential to do the necessary research to ensure that you're getting a good deal. Feel free to browse through our website or contact us for more information and details.