Being a condo owner is a dream for many home buyers. However, other expenses like maintenance costs and personal circumstances may play against your goal despite the lifestyle benefits. In this post, our experts from real estate markets will evaluate the perks of buying a condo vs renting to determine which option is a better idea in today’s market condition.
Buying a Condo vs Renting
Buying a Condo
If you’re buying property for the sole purpose of business opportunities, then considering condo ownership makes more sense than entering a rental agreement. The same predicament applies when you’re thinking of settling in a specific location to build a family. But what are the winning and losing factors when pursuing this venture?
Pros and Cons
The primary perk of buying a condo vs renting is that your unit will build equity for every mortgage payment, depending on the current state of the real estate market. Unlike rented property, the money you pay per month remains consistent.
On top of that, the interest rates of your monthly mortgage payments will be deducted from your property taxes. And if you’re looking for other forms of building equity, our team suggests investing in new appliances. Through this, you can start to participate in property market growth.
Now we discussed the advantages, let’s review the struggles condo owners often encounter in a financial sense. First, you must ensure that you have enough funds to cover the down payment and closing costs. If you have a bad credit score, expect higher mortgage interest rates.
Besides that, condo buildings have their own homeowners’ association that may require additional costs like condo insurance and HOA fees.
Renting a Condo
With 54 million Americans currently stuck with apartment living and paying rent , it’s no surprise that the current market conditions led owners to lease out their properties. Considering the rate of home prices and condo fees, renting is a better choice if you’re not yet financially able or not keen on getting a mortgage loan.
Pros and Cons
Although this type of condo lifestyle means that you’re obliged to pay monthly rent or a security deposit, renting itself exempts you from extra costs for property upkeep or state taxes. You also don’t have to worry about unintended damages because most of these are handled by the property manager.
Despite many advantages, you may also experience downsides when you rent a condominium. From the rental price that could increase anytime up to HOA regulations that limit access to certain amenities, a long-term stay may cost you more than you’d think.
If you find yourself unable to pay the month’s rent due to an increase in payments, being kicked out is very likely. Our condominium property experts suggest securing your financial sources first before deciding to rent.
Which is Better For You: Factors to Consider
Above everything else, you must evaluate the central location of the property. If you’re renting, you must determine if the individual neighborhood matches the community spirit you’re searching for.
Check the real estate prices within the area before buying. Then, weigh your options by using the price-to-rent ratio. Through this technique, divide the average annual rent by the actual condo pricing.
If your price-to-rent ratio showed 1-15, there would be no problem buying the unit. However, when the result comes out as 16-20, the investment may be risky. On the other hand, 21 onwards indicates that the unit in question is better to rent than to purchase.
If you plan to sell the unit, you must keep in mind that every property appreciates over time, so it’s important to check its principal amount of square feet, amenities, and other offerings.
(If you plan to buy a condo unit, you need to demand a condo status certificate to get vital information concerning the fiscal and physical situation of the unit you want to buy)
Your Source of Income
It doesn’t matter if you’re buying or renting; committing to condo living means you need a consistent income to maintain properties or pay rent. If you’re a renter, it helps to research the average rent rates within your area before signing an agreement to anticipate any increase during your stay.
It’s also common with owners to avail loans when buying properties, although we suggest checking your financial capabilities before considering one.
Responsibilities of Owning vs Renting a Condo
There are varying responsibilities one must consider when deciding between buying or renting properties. Besides paying monthly dues, renters don’t have many responsibilities. In contrast, owners must pay taxes, interests, assessments, and monthly mortgages.
As a renter, you have no worries about paying a mortgage. Property managers and landlords handle this responsibility. However, depending on the market condition, the rates that the owner has to pay may increase.
(For other investment option, you can also consider investing in a pre-construction condo here)
Is buying a condo better than renting?
Buying a condo is better than renting if you’re determined to live within the area for a long time. Turning your unit into a rental property is also a great source of income. On the other hand, if you’re constantly hunting for job opportunities that compels you to move from one place to another, it’s wiser to rent until you’re ready to settle.
Is owning a condo worth it?
Owning a condo unit is worth it if you’re thinking of settling within the area or planning to turn it into a rental business. However, keep in mind that this ownership has obligations and terms you must consider. From taxes, maintenance up to extra expenses — covering all these responsibilities is essential for a fruitful home investment.
Why should you never buy a condo?
You should never buy a condo if you want a wider living environment. Condominium units are known for their compact but complete structures, fixtures, and even appliances. So do not mistake it for buying a regular house. You’ll also need to reconsider if you have a bad credit score, which could incur higher interest.
Deciding between buying a condo vs renting involves many factors. From your financial capacity, personal commitments and goals, up to your career status — always remember to map your future plans when shopping for a home. After all, buying one requires an adequate amount of money and long-term obligations.