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Condo vs Apartment: What’s the Difference and How to Choose?

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When you live in a condo, you own it as property. When you live in an apartment, you just rent from a landlord.

Some would-be home buyers prefer to rent because it’s a flexible way to live. However, homeownership has benefits, too.

  • Homeowners build wealth through appreciation, and renters do not
  • Research shows that homeowners lead happier lives than renters
  • Homeowners can fix their housing payments for the next 30 years

Rent increased 10.9% in October 2021, which is the fastest year-over-year increase in over 16 years, based on the CoreLogic Single-Family Rent Index.  This year the Federal Reserve Bank of New York is expecting rent prices to rise about 10% as well. So, if you are thinking about owning a condo vs renting an apartment, now might be the time to understand the difference.

This article covers everything about condo vs apartment living so you can choose which fits your life best.

What’s the Difference Between a Condo vs. Apartment?

The difference between a condo and an apartment is who benefits from you living in it.

When you own a condo, you can build wealth through home appreciation. As the property value increases, so does your net worth. When you rent an apartment, the home appreciation goes to someone else.

If you’ve ever heard the expression “renting makes your landlord rich,” this is what they mean. Renters get none of the benefits when home prices rise. Landlords get it all.

Freedom is another difference between owning a condo and renting an apartment. When you own a condo, you can redesign your home, renovate your rooms, and replace your appliances if you’re into new technology.

You can even get a pet.

Apartment renters don’t have these rights. Your landlord makes the rules, and you’re just there to follow them – until you move out in a year, that is.

Condo ownership isn’t all wealth and considerable freedoms, however. When it comes to repairs and recurring costs, renting can have advantages.

What is a Condo?

Condo is short for condominium. A condominium is a private residence within a larger group of units or homes characterized by shared ownership of common areas such as lobbies, gyms, and green space.

Condos are also self-governing legal entities.

When you buy a condo, you also buy voting rights for the condo’s governing body – the homeowners association, which many people call “the HOA.”

Each condo owner gets votes equal to their ownership percentage in the building. If you own five percent of the condo, for example, you get five percent of the vote.

Condo owners can vote on such items as:

  1. What equipment to keep in the gym
  2. How much budget to spend on landscaping
  3. Who to hire for building maintenance

Owners pay recurring membership fees to the association. The fees pay for the building’s standard operating expenses, including landscaping, pest control, property insurance, snow removal, maintenance, and upkeep.

What is an Apartment?

An apartment is a private residence owned by a third-party landlord or management company and rented by a tenant.

Apartment rental contracts typically last 12 months, after which the rental terms can change. It’s common for rents to increase annually.

Apartment rental contracts are restrictive.

Tenants may not alter apartments physically, nor can they replace apartment fixtures. Customizations must be approved by a landlord and are subject to landlord approval.

In exchange for rent payments, landlords are responsible for essential apartment maintenance on plumbing, electrical, and heating and cooling systems. Tenants have very few rights.

Learn more about what happens when you break a lease to buy a house or condo.

Condo vs Apartment Expenses: Compared

Let’s break down condo vs. apartment expenses, one by one.

Maintenance

Condo: When you own a condominium, it’s your property, and everything within its walls is yours to repair, update, and maintain. However, there are times when the homeowners association will step in to assist.

Remember, common spaces and systems are co-owned in a condominium and governed and insured by the homeowners association. When pipes burst or systems fail, the association’s insurance policy pays for your repairs.

Similarly, if outdoor-facing windows leak into your condo unit, the association will reimburse your damages.

Before purchasing a condo, ask to see its governing documents, including the Declaration of Covenants, Conditions, and Restrictions (CC&Rs) and Bylaws which describe which parties are responsible for which damages.

Apartment: When you rent an apartment, your landlord manages and pays for all manner of repairs and maintenance to your unit. Your contract terms will define within how many days your landlord must provide service.

Many large apartment communities use online portals for routine maintenance requests such as loose bathroom fixtures and clogged kitchen drains. Larger requests for issues, including broken appliances and damaged pipes may require an on-site visit before a serviceperson will repair them.

Taxes and Fees

Condo: Like other homeowners, condominium homeowners pay real estate taxes to their local municipalities. Tax rates vary by county and school district and are proportional to your home’s valuation.

Condo owners commonly escrow funds to pay their real estate tax bills.

Condominium owners aren’t required to carry homeowners insurance because the building and its fixtures are insured by the condo association’s master condo policy. However, it’s wise to purchase insurance for your valuable items with a separate policy and to purchase liability insurance to protect against injury in your home.

You should also purchase a life insurance policy that covers the size of your mortgage in the event of your untimely death. A cheap policy may cost $25 per month.

Condo owners may also be subject to one-time fees for special building projects, as voted on by the association.

Apartment: When you rent an apartment, you pay rent to your landlord, and nothing else is due. All other costs, including real estate taxes, association dues, and special assessments are borne by your landlord.

If your rent does not include basic utilities, expect to pay:

  • Water bills
  • Gas and electric bills
  • Cable and internet service

If you have a dog, cat, or other pet, you may be asked to make a safety deposit. A dedicated parking space may cost extra, too.

Renters should purchase two insurance policies for their protection.

  1. Renters insurance policy for valuables
  2. Liability insurance policy for protection against injury

How to Choose Between a Condo and Apartment

Choosing between living in a condo and an apartment is choosing between owning a home and renting one.

When you own a condo, you own real estate and get the benefits of property ownership. Homeowners build wealth faster than renters because of home appreciation; and when you own a home, you can decorate and renovate in whatever ways you want.

By contrast, apartment living offers flexibility.

Apartment dwellers can relocate every year as their job or life requires, or simply move to a building with better tenant amenities. Owners don’t have that luxury. However, freedom to move comes at a cost – rents tend to rise year after year.

Our Advice: If you’re ready to buy and don’t relocate often, condos are a great fit

When you’re ready to stop renting and start buying, buying a condo can be an excellent way to generate wealth.

And, if you’re not paying cash, the best first step is to get pre-approved for a mortgage.

Happy homebuying!

Get pre-approved for a mortgage today.

Dan Green
Dan Green

Dan Green is a former mortgage loan officer and an industry expert. He's appeared on NPR and CNBC, and in The Wall Street Journal, Bloomberg, and dozens of local newspapers. Dan has helped millions of first-time home buyers get educated on mortgages, real estate, and personal finance. Have mortgage questions? Ask Dan in the chat.

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