Buying a Condo vs. Renting an Apartment: How to Choose the Right Option For You
Living in a condo community offers a unique lifestyle many people ultimately decide to pursue, thanks to the numerous benefits. These complexes are typically built in highly desirable locations, making it easy to "live, work, play" since condo neighborhoods are typically built near shopping, dining, entertainment, and public transit.
Generally, condos are lower in price than single-family homes, and the communities often come with great amenities, such as pools, gyms, clubhouses, golf, pet parks, and walking paths, to name a few. The condo lifestyle also offers little responsibility in terms of outdoor maintenance and repairs, which is good for people who are busy or simply prefer to spend their time doing other things.
Individuals looking to move into a condo often wonder if it's better to buy or rent. The decision will often boil down to the desired lifestyle, current financial situation, and individual goals. To help you decide if it's better to buy or rent a condo, keep reading for an overview of the most important factors to consider.
Consider Rent Costs vs. Mortgage Payments
Before signing on the dotted line of a lease, consider the financial differences between buying and renting—it might be surprising to learn mortgage payments might be more cost-efficient in the long run!
Rent is an amount a landlord determines that a tenant is obligated to pay, which offers a level of predictability in one's budget. However, once a lease is up, the owner has the right to raise the price, which makes a housing budget somewhat unpredictable long-term and creates a situation where a tenant either has to pay higher costs or move to a less expensive location.
Moving can also be costly, and many would prefer to stay put for extended periods of time instead of dealing with the inconvenience of moving every year or two.
It's not uncommon for monthly mortgage payments to closely align with going rent prices, but the big difference is that a rental payment helps pay the landlord's mortgage, not the occupant's. On the other hand, with each mortgage payment made, a condo owner gains equity, increasing their wealth—more on that in a later section.
One of the deciding factors should be whether an individual wants to stay in a specific area for the long term. An online mortgage vs. rent calculator can help determine where the "break-even" point is. However, even then, there are other financial opportunities that make ownership the more appealing option, such as benefiting from passive income. Speaking of which:
Condo Owners Can Make Passive Income
Should a condo-owner decide to move, this doesn't mean they're stuck having to simultaneously buy a new home, sell the condo, and deal with moving logistics—they can keep the condo and rent it out to make passive income. A huge benefit of ownership is that a condo can be leased out to help pay the mortgage, essentially converting the home into an investment property.
Long-Term Rental Property
One course of action a condo owner can take is to rent their newly-dubbed investment house to long-term tenants. This involves a lease which means the owner can depend upon consistent income for the contract duration. If owners successfully screen and identify people who are likely to renew their leases year after year, this makes for an even better stable passive income. Long-term rentals also mean easier management, since less time is spent on marketing and repairs between tenants.
Short-Term Rental Property
If the condo is in a highly desirable area or the owner still wants to use it periodically, another option is to market the home as a short-term rental, such as on Airbnb or VRBO, especially if it's near a big city or in a vacation destination.
Short-term rentals don't provide the consistent and predictable income a long-term rental does, but they usually command higher prices, which often easily offsets the difference. Furthermore, if the condo is consistently rented to short-term visitors, owners find they've gained a substantial income stream.
There are benefits to both long and short-term rental options, and owners should assess their goals and whether or not they want to have occasional access to use the property for themselves.
Condo Ownership Builds Equity
With each payment of the principal amount borrowed, a condo owner gains equity in their property. Once a condo owner builds enough equity in their home, they can leverage it to buy a new home or renovate their current one. Alternatively, down the line, they can opt to list it for sale (especially when the market is favorable to sellers) to recoup what they paid and potentially earn a nice profit.
Renters don't have that option, since every monthly payment they make goes straight into someone else's bank account; once spent, that money is gone. The bottom line is that the landlord is the person steadily gaining equity and setting themselves on the path to building more wealth.
Maintenance Responsibilities As an Owner vs. As a Renter
Condo maintenance responsibilities are one of the notable differences between ownership and renting. For instance, homeownership comes with costs that renters aren't typically responsible for, such as maintenance, repairs, taxes, and COA/maintenance fees. Renters just need to call their landlord or their designated representative if a problem arises, and they aren't responsible for these or other ownership-related costs.
People who aren't ready to purchase a condo because they aren't ready to set down roots, aren't in a financial position to invest in a down payment, or otherwise don't want the responsibility of homeownership might find it makes more sense to rent a condo. When it comes to moving, renters tend to have more flexibility with moving than owners do. However, ownership comes with perks like being able to renovate the interior, making it easy to maximize the condo's space and personalize it to the owner's taste.
Apartments are a Smaller Commitment
When deciding if you should buy or rent a condo, it is important to consider the size of the commitment. A mortgage is typically a 15–30 year commitment, while an apartment rental agreement can be made for as little as one month to as many as 14, with most leases typically being 12 months. If you're anticipating changing jobs and want to move to avoid a time-consuming commute, it's a lot easier to move at the end of a lease or end it early than it is to sell a condo and purchase a new one.
Additionally, if you want to experience a new city before deciding whether to make it your home, renting an apartment may be the ideal option. Even if you decide to stay and buy a condo, you’ll have more time to get used to the neighborhood and learn about the various complexes in the area.
Ready to Take the Next Step?
People who have evaluated their goals and financial situations and have decided they're ready to take the next step to pursue condo ownership should contact a local, knowledgeable real estate agent. Connecting with the right agent can help ensure they identify a home in a desirable location that offers the amenities to help them achieve the lifestyle they seek, whether they choose a condo, townhome, or single-family residence.