Buying a condo vs renting an apartment
Deciding whether to buy a condo or rent an apartment can be tough. There are lots of things to think about, from important economic considerations through to the impact on your current and future lifestyle. Where do you want to live? Are you able to raise a deposit? Do you have plans to raise a family or move to a different city? Making the choice between buying or renting can have huge implications for your economic future and your quality of life.
What is a condo?
Before you start, it's important to understand just what a condominium is. Contrary to popular belief, a condo is not a type of dwelling but a particular ownership arrangement. Purchasing a condo gives you ownership over an individual apartment, along with the right to use the common areas and assets of the community. You own everything inside your four walls and pay monthly condo fees to help maintain all communal assets. You don't own the swimming pool, the gym, the surrounding land, or even the hallway.
What is an apartment?
Making the distinction between a condo and an apartment can be tricky, with individual condo units often referred to as apartments. Despite this common usage, it's impossible to purchase an individual apartment, with these individual units leased and available to rent alongside other apartments in the same building. While you can purchase an entire apartment building and rent out individual units to other people, this is obviously very expensive and out of reach for most people.
Benefits of renting an apartment
Renting an apartment does provide a number of benefits over buying a condo, including less expense, greater personal freedom, less responsibility, and a greater ability to invest in other markets. First and foremost, renting an apartment is generally cheaper than purchasing a condo in the same location. While the price-to-rent ratio varies considerably between locations, the lack of condo fees makes apartments more affordable in most situations. With no deposit to save and no property taxes to pay, renting is also more accessible to young people and low-income earners.
While people often view renting as "dead money", you can counteract this to some degree by investing the money you save into equities and other high growth markets. Renting is also associated with a number of lifestyle benefits, with no mortgage making it easier for you to move around and take advantage of new work and social opportunities. With fewer responsibilities and the ability to travel when your lease runs out, you can go where the work is, indulge in a six-month working holiday, or follow a new love interest to the other side of the world.
Benefits of buying a condo
Purchasing a condo offers numerous advantages over renting, including greater financial freedom, increased safety and security, and the ability to build equity over time. While buying a condo will normally be more expensive than renting in a similar location, every dollar you pay is adding to an asset that you own and can sell in the future.
Unlike renting, property ownership allows you to provide value for yourself and your family for years to come. Not only can you sell your condo for a profit in the future, but you also have the freedom to generate rental income in the meantime to help pay off your mortgage.
Buying a condo also provides a number of lifestyle benefits, including better stability and security, improved access to amenities, and the ability to live in a desirable central location. While condo fees are mandatory and can seem expensive, they help to maintain this great lifestyle and can actually save you a lot of time and money in the long run.
While there are a few exceptions, condos are generally much nicer places to live than apartments, with more modern amenities, more desirable locations, and a greater sense of community spirit than apartment buildings.