Condo ownership
zkt
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Registered User regular
Im sitting here thinking about where I'd like to be in the next decade and browsing real estate, teaching myself about how mortgages and equity work and it dawns on me that home ownership may not be for me. I'd like to own my own property to pass onto my child (I'd like to just have one) and home ownership seems like it requires a lot of work maintaining your property and such. What are some of the pluses and minuses for owning a condo vs. a house, and are they really that significant? Since I'd like to only have one child I think it would be a decent environment to raise a kid in.
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Also condos are more influenced by the building they belong to as opposed to a house and the neighborhood it is in.
A condo in an empty highrise is basically worth nothing to a bank. Why? Nobody to pay the HOA fees, the building deteriorates, gets converted to rentals, and the prices drop, your condos value evaporates overnight.
My advice would be to only buy a condo if you can find a great deal in a good building/property and finance it well, so that you can maybe live in it for a year or two, spruce the hell out of it, and then rent it for a pretty penny.
The American Dream isn't owning your own home, it's owning someone else's home. Condos are not a bad place to start with that if you make the right moves.
Ideally, make sure the building has a healthy condo fund (over a million in the bank is nice) and that the condo fees aren't crazy. Compare condo fees to other comparably-sized condos, see if heat/water is included, etc. Generally, for your first place, you want something that is not going to lose value, so whatever you do, get a good building. That's the main thing. You can always sell and move up, but if it loses value, you're screwed.
Also, newer is better, but always buy something at least 3 years old - some building problems (bad plumping/wiring, for instance) take a while to come up, and they'll just charge every owner a hunk of change to fix it. One building I looked at later found out that the glass siding over the entire building was installed with faulty glue and had to be reseated - millions down the drain.
Edit: Lastly, about renting until family - if you have the cash for 20% down, buy as soon as you can. Land (in a city!) is almost always a good investment. Better than giving your money to someone else, who is just paying a mortgage anyway. Interest rates are historically low, and should remain very low for at least another 2 years, likely many more.
You're not comparing apples to oranges. Mortgage is only part of the ownership costs.
Costs of renting: Rent
Costs of owning a house: Mortgage, Property Tax (and various other yearly fees), Maintenance
Costs of owning a condo: as above, add owner association fees.
Be aware the HOA will not cover all maintenance issues (in fact, typically it's only common property), so choosing a condo to save on maintenance is probably a bad idea - do the math.
Factor in the ongoing costs of a property into its value. If you have to houses with the same purchase price, but one has a $1000/year HOA fee, assuming a 3% savings interest rate over the long term and a year over year increase of 1% in fees, the HOA house is actually worth:
$1000 / ( ( 1.03 * 1.01 ) -1 ) = $24,814 less than the non HOA home.
(plug in your own interest rate and inflation figures, i pulled those out of the air). Do the same thing comparing houses in different areas that may attract different tax rates or other differences in ongoing costs.
(This doesn't take into account the non financial issues of a HOA, which are also HUGE, but I'm a maths man).
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I'm not saying you should buy a house, just that most of the maintenance issues you're responsible for in a house you are also responsible for in a condo.