Is it better to get a condo or an apartment?
Many North American cities are moving towards a European style of living. Rather than living in the suburbs and driving each day to get to work, people are choosing to buy or rent units close to where they work. If you're looking for somewhere to live close to the city center, you have an important decision to make between renting an apartment or buying a condo.
Pros of renting an apartment
Let's face it, not everyone is ready to be a property owner. A significant down payment is needed before you will even be considered for a mortgage, with 3.5-10 percent needed for FHA and other government-insured loans and as much as 20 percent needed for conventional loans. If you don't have access to this kind of money, your only choice is to rent an apartment and start saving.
Not only are apartments more accessible for most people, they also come with fewer responsibilities and enable greater freedom of movement. For example, renting an apartment can be a great option for anyone in a long distance relationship or anyone who needs to take advantage of work or study opportunities in different cities.
Cons of renting an apartment
Renting an apartment is not all good news, however, with greater accessibility and additional freedom of movement often outweighed by lack of housing security and "dead money". When you rent an apartment, you generally sign a six or twelve month lease. When this time is up, the landlord has no obligation to keep you on as a tenant, with some people moving between multiple apartments in a matter of years. While there are long-term rental agreements in some cities, lack of housing security is a very real disadvantage.
Other than lack of security, renting is often seen as a poor option due to the status of rent as "dead money". When you pay rent, you are helping to pay off another person’s mortgage. In essence, you are helping someone else to build equity rather than investing in your own financial future. While you do have more freedom as a renter, there is a significant financial price that you have to pay.
Pros of owning a condo
Buying your own condo is a great option for most people. Whether you're a young couple looking for your first property or a retiree looking to downsize, condos are an affordable and accessible way to own property in a desirable location. When you purchase a condo, you are also investing in your lifestyle, with the inner-city location and amenities of most condos helping people to upgrade their quality of life.
Unlike renting, buying a condo provides you with housing security and allows you to build equity over time with an asset of your own. Not only does it feel like the responsible adult thing to do, it also gives you options in the future if you want to generate rental income as a landlord or sell your property to finance other real estate investments.
Cons of owning a condo
Despite the numerous benefits of buying a condo, there are some disadvantages associated with the condo lifestyle. Condo fees are an issue for some people, with monthly fees payable to the Homeowners Association (HOA) in exchange for looking after the building and its amenities. The rules and regulations of the condo board may also cause problems, especially if you've moved into a building without doing your homework first.
Buying a condo can also be more stressful than renting due to additional upfront expenses and increased financial responsibilities. However, most people would agree that this is a small price to pay in order to access long-term housing security, improve your quality of life, and build equity to ensure your financial future.