Is it smart to invest in a condo? Or is an apartment a wiser choice? There are certain advantages and disadvantages to each option. It is a good move to research into these pros and cons so you can do a thorough comparison.
A common misconception is that these two types of properties are differentiated from each other based on how they look. But there are more differences to these two than what would initially appear. Before you make the wrong assumption, it is important to inform yourself about which is which. The more you know the difference between a condo and an apartment, the easier it is for you to decide which one to purchase.
Introduction to Condos
“Condo” is a term used to refer to condominium properties, which are a private residence that can be rented out or occupied by the owner. A condo unit is typically a part of a residential building or community. The landlord or the owner of the condo property holds full discretion about the maintenance and operation of the unit.
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Outside of the unit, condo owners are subjected to the laws imposed by a homeowners’ association. The association must make decisions and implement actions collectively and that would impact the entire complex.
As such, the condo unit owners must pay the homeowners’ association fees. The funds collected will be used for the activities or events that will be conducted by the association for the benefit of the entire community.
Introduction to Apartments
An apartment is largely similar to a condominium wherein multiple units belong to a single building. An apartment, unlike a condo, is owned by someone else other than those who occupy these units. The apartment is made available for rent with the intent of collecting rental income. An apartment building is never owner-occupied (unlike condos).
Those who occupy an apartment must pay rent based on the legal agreement between the tenant and owner. Depending on the agreement, the tenant may or may not pay for the utilities.
Condo vs Apartment: What’s the Difference?
Now that you have a basic understanding of a condo and apartment, it is important to look more in-depth at the differences. Here are some of the basic areas wherein these two types of real estate properties differ largely.
The ownership of the property is where the main difference lies between a condo and an apartment. A condominium is managed by the homeowner’s association but there are individual owners within the entire complex.
Buying a condo works in the same way as buying a house. And just like a house, this property can be rented to tenants who must pay a corresponding rental fee. As the owner of the condo unit, landlords are responsible for paying the homeowners’ fees and maintenance fees on the unit. For instance, when there are window replacement jobs, the condo owner will have the responsibility of contacting My Affordable Glass and Remodeling for new windows.
On the other hand, apartments are not available for purchase. More often than not, an entire apartment building is owned by a single landlord or corporation. The individual units are made available for rent in a short- or long-term period.
- Rental Cost
Since both condos and apartments are available for rental, they are similar in this respect. But they do differ significantly when it comes to the cost of the rental. Renting a condo is considerably more expensive. Not only because they are often built in prime locations, but because they offer more amenities and facilities. From pools, gyms, and lounge areas, these are taken into account when computing the rental cost of a condo.
Apartments are generally cheaper when compared to the cost of renting a condo. But prices can vary significantly in terms of the size of the unit and its location. For instance, a three-bedroom apartment would cost more than a one-bedroom apartment. On the other hand, the closer the apartment is to the city center, the more expensive it will be.
- Facilities and Amenities
Access to modern amenities is another primary difference between a condo unit and an apartment unit. Condominiums promise a higher-end lifestyle with its proximity to the city center. You can, therefore, expect modern facilities such as swimming pools, lounges, elevators, and fitness centers in a condominium.
On the other hand, apartments do not offer these types of facilities. In fact, there are no amenities provided at all since the unit itself is what you are paying the rent for. This also explains why condominiums charge a higher rental fee than apartments.
- Monthly Fees
Owners of a condo unit have the added responsibility of paying for the homeowners’ association fees. This is on top of the monthly amortization on your condo unit, which is a responsibility shouldered by the owner of the unit. But those who are renting a condo unit won’t necessarily have to pay for these fees.
Apartment tenants do not have to pay for association fees. Generally, you pay the rental price and, often, the electricity and water bills. The downside is that you do not have control over the increase in rental prices.
If the main purpose of buying real estate property is to build equity, you can leverage your condo purchase for this purpose. The appreciation rate of a condo unit is slower than if you were to buy a house and lot property (such as single-family home).
But the market value of a condominium is more likely to increase than when you rent an apartment. Renting a property offers no investment potential since you have no ownership of the property. When it comes down to it, buying a condo unit (even when you opt to finance it) will help you build equity over time.
However, if you wish to be a landlord of multiple units, you can either buy several condos from different parts of the city or obtain an apartment building. Either way, they can be a great investment if marketed and managed well.
As you can see, there are notable differences between buying a condo and renting an apartment. It is important to weigh the pros and cons of each option. It is crucial as well to start by knowing your preferences, as well as your short- and long-term goals.
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