If you are trying to decide to get an apartment vs condo, it’s important for you to understand the differences between the two, so you can make the best decision for yourself. That’s why this post will walk you through everything you need to know as you make your decision.
Searching for a new home is a complicated process. There are so many things to take into account. From location to size to amenities, you will be faced with a lot of decisions in a short timeframe. One of the most daunting decisions you’ll have to make is whether to get an apartment or a condo.
The fundamental difference between an apartment and a condo is an apartment is rented while a condo is bought. As such, this decision will force you to make a much larger decision: should you be a renter or a buyer. There are pros and cons to each, and depending on where you’re at in your life, one may make sense than the other at this time.
By the end of this post, you will know everything you need to make your decision. You will have a strong understanding of the differences between an apartment and a condo and the implications of going with one over the other.
This post will help you answer whether you should get an apartment vs condo!
Best Apartment vs Condo Tips:
1. Understanding the Difference Between Apartment vs Condo
Before you can make your decision, you need to understand the differences between an apartment and a condo. When you look at an apartment building and a condo building side-by-side, they will look exceptionally similar. You will probably see two multi-story buildings with lots of windows and potentially some balconies. Just by looking at the building, you probably wouldn’t be able to tell which is a condo and which is an apartment.
Even if you looked inside the buildings, there wouldn’t be any noticeable differences. You would find the both likely offer one-bedroom and two-bedroom options. They may have different finishes and slightly different floorplans, but at the end of the day you will get the same features for an apartment as you would a condo.
So what’s the difference? While you can’t physically see the differences between the two, there is a fundamental difference on paper. An apartment is a unit that you rent out by signing a lease. A condo is a unit that you buy and own.
With an apartment, you will sign a lease for a set amount of time (usually 12 months) and make monthly rent payments. Apartments usually require little upfront investment and do not come with a long-term commitment.
With a condo, you will make a longer term commitment to the home by taking out a mortgage or buying it with cash. To buy, you will need a larger sum of money upfront to make a down payment, and you will have a commitment to paying mortgage payments and/or property taxes for the long-term.
2. Advantages of an Apartment
Apartments tend to get a bad rap. I personally grew up with a dad that described renting an apartment as “throwing money away.” However, renting an apartment actually has a lot of advantages. In fact, as someone who has rented for more than five years, there’s actually a lot that I like about renting.
For starters, renting has relatively low upfront costs. Most apartments will let you sign a lease for about the cost of one to two months rent. It’s usually a couple thousand dollars, and most of the money you’ll be able to get back at the end of your lease in most cases. As a result, there is a very low cost of entry compared to buying a place.
Another thing I love about renting is that all your maintenance if taken care of by the landlord. An appliance breaks? Your landlord has to fix it or replace it. There’s a plumbing issue? You landlord is completely responsible for it. That means that any issues you have will be fixed without costing you any additional money out of your pocket. If you owned your home, you would be responsible for all those expenses.
Renting an apartment also offers you more flexibility. When you sign a lease, it is for a specific amount of time. That means, once your lease is up, you have the freedom to renew or move anywhere you want. For this reason, I think renting is a great option for someone that is trying to figure out what they want from life. If you’re unsure if you want to live in your city long-term, renting is likely the better way to go.
3. Cons of an Apartment
While there’s a lot to love about renting an apartment, there are some disadvantages to consider. To start, your landlord could raise the costs on you at the end of your lease. This means that your monthly cost is only predictable for a short time. If the price increase moves the apartment outside of your price range, you may have to leave even if you love your apartment.
Also, since you don’t own the apartment, there are limitations to what you can do with the space. For example, you can’t make any major renovations to the apartment. The only way to can customize your apartment is through your furniture and decor. The floors, countertops, layout, and appliances cannot be changed. Some apartment complexes will let you paint the walls, but others will not. As a result, you’re freedom to do what you want with the space is dimished.
Finally, the money you are paying for your rent is not being invested into an asset. When you pay rent, that money goes to your landlord. That isn’t to say that rent is a waste of money. You are still getting a place to live out of it; however, you will never see that money again.
4. Advantages of a Condo
Condos have a reputation of being a good starter home. They are usually less expensive than a single-family house, and allow you to transition from renting to owning. When you own a condo, it’s yours to do what you want with it. You have the freedom to make the home your own. You can keep it exactly how you bought it, or you can redecorate it from floor to ceiling. If you want to tear down a wall, you can do that.
Also, when you buy a condo, you are making an investment in an asset that may appreciate in value. While housing markets are hard to predict, most homeowners in the US have built equity through homeownership. That means that if you decide to sell the condo one day, you may be able to sell it for more than you paid for it. As a result, it may be able to help you build wealth in the long-term.
Plus, when you have a mortgage, you will lock in a set monthly payment for a set time period (usually 15-years or 30-years). Then, when you pay off the mortgage, your monthly housing cost will go significantly down. While you will still have to pay homeowners insurance, property taxes, and HOA fees in many cases, the mortgage cost will likely make up most of your monthly costs. That means when you pay that off, your monthly housing expenses can greatly decrease.
Another advantage to owning a condo is it is more stable than an apartment. Since your monthly cost is fixed, you won’t have to worry about rent increases that will make you move from apartment to apartment. You will have a stable place to call home until you sell. Stability can be an appealing feature for starting a family.
5. Cons of a Condo
While there are a lot of advantages to buying a condo, there are also some cons to consider. The first one is the upfront cost. To buy a condo, you need a down payment. While down payments can range anywhere from 3.5% to 20% of the home cost, it’s generally better to aim for the higher end of the range. If you buy a home with less than a 20% down payment, you will need to purchase mortgage insurance which is an additional monthly expense. If you can put down a 20% down payment or more, you can avoid this cost.
In addition to the down payment, you will have to pay closing costs which can be up to 6% to 7% of the total cost of the home. That means, you need to have a lot of money saved before you can buy a condo. As a result, the upfront costs can be a big barrier to buying a condo.
Additionally, buying a condo is a long-term commitment. Depending on where you are in your life, that may be appealing to you. However, if you are not clear on your life direction, buying may not be a good option. When you buy, it is generally not a good idea to sell your home for five or more years from when you bought. So, if you end up wanting to move in a year, you may actually lose money in equity rather than gain depending on the market conditions.
6. Choosing an Apartment vs Condo
When it comes to choosing an apartment versus a condo, it really comes down to your current life circumstances. You need to ask yourself a lot of tough questions about your finances and lifestyle. To help you, I’ve created a quiz. Answer yes or no to the following questions:
- Do I have at least 26% of the condo’s cost saved? If not, am I willing to pay mortgage insurance?
- Do I plan to live in this city for the next several years?
- Do I want to be able to customize every feature of the place I live?
- Am I planning on having any major life changes (getting married, having a baby, etc.) in the next few years that would make stability more appealing?
- Am I prepared to fix any maintenance issues that may arise over the next couple of years?
If you answered mostly “yes” to the questions above, buying a condo might be the better option for you at this time. If you answered mostly “no” an apartment may be a better fit for you right now. Honestly, at the end of the day, both choices can be good for you. It just comes down to where you are in your life right now.
As you a making your decision, it might be a good idea for you to work with a financial advisor to see what would be better for you at this time. Whichever decision you make, know that you did the best thing for yourself at this stage in your life, and your decision could be different in a couple of years. In both scenarios, you can find an amazing place to call home!