Build Equity and Ditch the Maintenance: The Pros and Cons of Buying a Condo

Perhaps you’re a retiree whose children moved out years ago to start their own families. You spend your days among the empty bedrooms of your single-family home and decide that it’s time to downsize. A small place in a warm climate — maybe near a beach — sounds immensely appealing.

Or maybe you’re a young couple who’s been renting for years in a vibrant city. You want to start building equity, but buying a home downtown feels daunting due to the costs and upkeep involved.

No matter what your situation is, if you’re looking for a low-maintenance home where you can build equity while enjoying luxury features like swimming pools, tennis courts, and on-site fitness centers, a condo may be for you.

Condos are convenient, don’t require a lot of maintenance, and are often packed with amenities. But strict homeowners association (HOA) guidelines, additional fees, and close proximity to neighbors mean that condo living isn’t ideal for everyone.

We talked to real estate experts who specialize in working with condos to round up the pros and cons of buying a condo. From knowing what amenities are included to understanding HOA governing documents, here’s what you need to consider when deciding whether a condo is the right type of home for you.

What is a condo?

Short for condominium, a condo, by the simplest definition, is a privately owned unit within a multi-unit property or complex. Though similar to an apartment in that both include many dwellings within a larger structure, the ownership structure of a condo is what sets it apart. Rather than renting a space from a landlord who owns the entire building, people interested in condos are able to buy their individual unit and build equity as with a single-family home.

And while condos are individually owned like single-family homes, they differ in that condo residents share walls, common spaces, and amenities with their neighbors. Condo units can vary in size, and building layout will determine how many walls a particular unit shares with neighbors.

Who is looking for a condo?

Condos appeal to people who are looking for a low-maintenance home with plenty of access to amenities. For these reasons, condos tend to be popular with older homebuyers, like retirees, empty nesters, and those looking to downsize from a single-family home.

But that’s not to say that they’re just for older homebuyers. Condos have benefits for first-time homebuyers, young families, and busy professionals as well.

Single-family homes often require a lot of upkeep — and ongoing expenses — that can be daunting for first-time homeowners or young families with busy lives. People who live in vibrant cities and have demanding jobs may not have the time to fix a leaky roof or arrange for a repair. Parents with young children may rather spend their evenings and weekends playing catch or dress-up than mowing a lawn.

Another draw is that you can find condos in virtually any setting, from beachfront properties to popular cities where residents can enjoy access to shops, restaurants, and public transit.

“There are advantages for everybody, quite frankly,” says Ralph Iorio, a top-selling real estate agent based out of Marco Island, Florida, with extensive experience selling condos.

“Condos have views that houses don’t have and could be placed in more rural areas where houses can’t be placed. So, you know, each has their pros and cons but I think it comes down to just how much do you want to be responsible for.”

Pros of buying a condo

Affordability

One reason condos appeal to such a diverse group is that the cost is typically lower than that of a single-family home. According to the National Association of Realtors, the national median price of a single-family home in 2020 was $300,200, while the median price for a condo was $266,300.

Of course, prices can vary throughout the country. A condo on the beach or in New York City will likely cost more per square foot than a one that is inland or in a more rural area. But overall, Iorio estimates that people looking to buy a condo can expect it to cost 15% less per square foot than single-family homes, no matter the location.

HOA management

Most condos have an HOA that is responsible for maintaining roofs, building exteriors, lawns, shared spaces, and amenities. Condo owners maintain their individual units. HOAs also set and enforce rules for the building that keep the property clean and running smoothly, and aim to keep the building’s residents happy.

HOAs are often professionally managed and they can help keep property values high and reduce insurance costs for condo owners. Researchers at the University of California Irvine found that residences in an HOA were valued 4% higher on average than similar homes that did not belong to an HOA, Forbes reports.

A 2016 report from the Community Associations Institute estimates that condo associations make up between 42% and 45% of America’s 342,000 community associations, and it’s easy to see why these types of organizations are so popular. HOAs remove a lot of the stress of homeownership for condo owners.

Lower home inspection and insurance costs

Most home inspections are priced by square foot, with some inspectors charging a flat fee — say $300 for a 2,000-square-foot home — and an additional rate for each extra square foot. Since condos generally have less square footage than single-family homes, their inspections are often cheaper, with some condo inspections costing as little as $200. Comparatively, inspections for a single family home are around $275 to $400, though cost varies by size, home age and location.

“Since you don’t have to inspect the roof, since you don’t have to inspect the exterior, since you don’t have to inspect the structure, the prices are generally always less for condo inspection than a house,” says Luis Perez, a Florida home inspector with Truview Inspections, who specializes in condo services.

Average homeowners insurance costs for condos in the United States hovered around $389 per year in 2017 for a $1,000 deductible policy with $60,000 in personal property coverage and $300,000 in liability protection, according to data from the National Association of Insurance Commissioners (NAIC). In contrast, NAIC reports the average annual premium for a single-family home was $1,211 in 2017.

These costs are generally lower for condos due to the smaller unit size, regular security, strict maintenance, and community standards set by the HOA. Some HOAs even offer discounted homeowners insurance policies available to condo owners.

Building equity

One of the biggest pros of buying a condo is that they allow buyers to own rather than rent a unit within a building, and thus allows them to start building equity. For young, first-time homebuyers this can be especially appealing because appreciating condo values may allow them to sell their unit for more than their purchase price if they decide to make the jump to a larger space in the future.

Stress-free maintenance and security

In-house maintenance and security are two of the biggest benefits of owning a condo. As we mentioned, condo owners are responsible for maintenance within their individual units, while the HOA is responsible for maintaining all common areas, including grounds, roofs, and building exteriors.

That means when damaging storms hit, condo owners aren’t responsible for replacing siding or repairing roofs. You won’t need to spend your weekends on landscaping tasks like mowing lawns and pulling weeds. If you live somewhere with snowy winters, you can save a few bucks (and back aches) because you won’t need to shovel.

Most condos come move-in ready and some even come fully furnished. Many condos have gated entry or security services that help keep residents safe and reduce the risk of break-ins.

Easy to pick up and go

Whereas single-family homeowners need to plan for things like lawn care and maintenance — or potentially hire a house sitter — when they’re away, condo owners can just lock the door of their unit, knowing that the HOA will take care of things in their absence. This can be particularly appealing to anyone who spends a lot of their free time traveling.

Accessible luxury living

While condos make it easy for residents to travel, amenities can make day-to-day life feel like a vacation. Many buildings come with perks that would cost a small fortune to include in a single-family home. Condo buyers may enjoy a mid-afternoon dip in the pool on hot summer days, stay fit using a community gym, or polish up their tennis game, all without leaving the comfort of their community.

Part of a close-knit community

Shared amenities offer condo owners plenty of opportunities to get to know their neighbors. Whether it’s running into them in the gym or at the pool, or hanging out together in a shared lounge, you can bond with people living around you. Many associations also plan social activities like game nights, cocktail mixers, and barbecues.

“Many communities offer on-site activities directors. If you want to get involved with the community you can,” Iorio says.

Cons of buying a condo

HOA regulations

Association guidelines may be in place to help increase property values, reduce insurance costs, and create a happy, vibrant community, but that doesn’t mean that they don’t feel limiting for some buyers.

When an HOA steps in and restricts the number of pets you can have or the types of renovations you can make to your unit, it can feel overbearing for some buyers.

“The association would be a little bit more involved with your daily life, as opposed to living in a suburban single-family home, where you have no one watching over you,” Iorio says.

HOA fees

One of the biggest things that gives buyers pause when looking at a condo is the HOA fees. These payments go toward maintaining the building’s shared spaces. They may also cover electricity, wifi, and cable, as well as water and sewage charges. Additionally, HOAs may ask you to pay for using some of the amenities, similar to a gym membership, but residents often have an opt-out option.

“Your fees take care of a lot of the costs that are associated with homeownership. You don’t have to pay for it individually,” Iorio says.

The monthly bill can vary greatly. Fees for condos that include more amenities may be as high as $1,000 per month, whereas you may pay $200 or less per month or for a building that only has the basics. If you’re looking for an older condo, be prepared for higher fees since the building may require more upkeep than a newer complex. Location is also a factor. In New York City, for example, average HOA fees, or maintenance fees as they’re sometimes known, are around $1,500 per month. In comparison, in Des Moines, Iowa, a 1,000-square-foot condo without amenities has a $100 per month HOA fee.

Iorio recommends breaking down costs like utilities, wifi and cable packages, lawn care, and home maintenance that come with owning a single-family home, and then comparing them to a condo’s monthly fees. You might be surprised by the result.

“Many homebuyers when they’re looking at a condo get sticker shock when they take a look at the monthly association dues,” he says. “But if you analyze it in a way that I just laid out, they see that it’s generally the same.”

Potential for HOA mismanagement

While a well-run HOA can function as an asset to owners by helping keep property values high, a poorly managed one can be a pain point for condo owners. If an HOA mismanages its funds, it could prevent proper maintenance of the building’s exterior and shared spaces, which can ultimately reduce the value of your condo.

Most HOAs have both an operating account for regular expenses like lawn care and snow removal, and a reserve account that saves money for emergency maintenance and long-term projects. In an ideal situation, both accounts would be sufficiently funded, but if an HOA isn’t well managed there may not be enough money in the reserve account to cover unexpected expenses. If that happens, condo owners may have to make up the difference.

Lack of privacy

While condos offer close-knit communities, it is possible to feel too close to your neighbors. Noisy, messy, or disruptive neighbors can be a nuisance and they can make it difficult to sell neighboring units.

Since condo owners often share walls with their neighbors, the noise doesn’t necessarily have to be very loud for it to be disruptive. If you’re someone who enjoys quietly easing into the day with a hot cup of tea and the morning news, it could be grating to hear the person next door grinding coffee beans or slamming kitchen cabinet doors. Similarly, if you love entertaining or playing loud music, it might be frustrating to have your neighbors constantly asking you to keep the volume down.

Bad neighbors can exist anywhere — even in a suburban single-family home. But with a condo, the HOA may be able to step in and help smooth things over.

Selling concerns

All of these potential issues can make a condo more difficult to sell than a single-family home. Additionally, condos simply may have limited appeal for some buyers. Families with children or pets may desire a home with a yard that isn’t shared with neighbors, and others may not want to purchase a condo because they don’t want to live with strict HOA regulations.

The quality of your HOA heavily influences your ability to sell a condo, so you’ll want to be sure to find one with a well-run, well-funded HOA to increase your chances of seamlessly reselling your unit in the future.

Tips for finding a condo that’s right for you

Understand the HOA governing documents

When trying to weigh the pros and cons of buying a condo, it can help to review the HOA governing documents.

These documents define what a unit is and what it includes. They also outline the common areas, like parking lots and amenity spaces, and what is shared by only a few residents, such as common doors, mailboxes and patios. Understanding this information will give you a sense of what you’re responsible for when you take ownership, and the HOA regulations you’ll need to follow.

In many cases, potential buyers can review these documents before they’re locked into a purchase agreement. Some states, like Florida, have laws that allow buyers three days to rescind an offer after they’ve received a HOA disclosure, so check the laws in your state to understand your options.

“I would say before you go into a formal agreement where you’re locked into the purchase, actually read the rules and regulations of the association,” Iorio says. “You want to make sure that the documents make sense for the lifestyle that you want to live.”

Additionally, you can ask to see the HOA budget and the minutes of the past few board meetings. Though the HOA can refuse to turn them over, these documents can give buyers a sense of how the HOA is run, how monthly dues are spent, and if the HOA is carrying any debt, so it is worth asking at the very least.

Get an inspection

Before purchasing any type of home it’s important to perform an inspection, and a condo is no exception. “Your investment is only as good as your inspection,” Perez says.

During a condo inspection, the inspector will check the unit you’re purchasing and they will test appliances, check plumbing systems, look for things like moisture damage, and examine and test the unit’s heating and cooling system. Perez notes that while condo inspectors do not examine the roof of the building, in many cases they will need access to the roof in order to fully assess the cooling system, as that’s where many air conditioner condensers are located. You should coordinate with the building’s HOA to make sure the inspector can access the roof and complete their work.

Meet the neighbors

Talking to people who already live in the complex can give you a sense of what type of community you’ll be joining, how the HOA is governed, what restrictions you’ll face, and what the vibe of the community is as a whole. Worried about noisy neighbors? Want to live in a tight-knit community? The neighbors will be in the know.

Not ready to buy? Try renting first

If the amenities and low-stress maintenance aspects of condo living appeal to you, but you’re not ready to buy just yet, renting a condo could be a great alternative. In some cases, condo owners or investment companies will rent out units, which can give you a chance to see whether you like condo living without the commitment of purchasing.

If you’re ready to learn more, working with a buyer’s agent can help you understand the pros and cons of buying a condo, know what to look for, and determine if a condo is the right fit for you.

“It depends on your life, your lifestyle and what you’re looking for,” Iorio says. “If you’re looking for low maintenance then buying a condo is the best way to go.”

Header Image Source: (Wengang Zhai / Unsplash)