What Is A Condominium?

A condominium, often shortened to “condo,” is a type of residential property in a larger building or complex where each unit is individually owned, and common areas are jointly owned.

A Longer Definition: Condominium

Condominiums are groups of homes, governed by an association of elected homeowners. They can exist in apartment buildings, and as townhouses or homes in a neighborhood.

When you own a condo, you own everything within the walls of your home, plus a percentage of the areas common to the community.

Common areas in a condo association can include:

• Streets and parking garages
• Hallways and elevators
• Gyms and grassy areas

For example, if a condo community contains a common elevator, each condo owner owns a percentage of the elevator. If it contains a shared yard, each owns a percentage of the yard.

Condominium owners elect a Homeowners Association (HOA) to manage common areas and keep the community running smoothly. The HOA makes rules for the members and maintains a master condo policy to insure the common areas of a building against damage.

Because condominiums are communities, mortgage lenders underwrite them differently from detached and multi-unit homes.

Condo communities that meet basic financial, operation, and safety standards are known as warrantable condos. Home buyers in warrantable condo buildings can usually access a full menu of mortgage products, including fixed-rate and adjustable-rate conventional, VA, and FHA mortgages.

Communities that do not meet warrantable condo standards are known as Non-warrantable condo. Non-warrantable condo mortgage options are limited.

Condominium: A Real World Example

Imagine a first-time buyer who enjoys living in an apartment because of the community feel and amenities like an on-site gym and pool but wants the benefits of owning a home.

They decide to buy a condo. Buying a condo lets them live in the type of building they want, while also potentially building wealth through their home’s value increasing over time. This didn’t happen as a renter where any increase in value went directly to the landlord.

Plus, as a condo owner, they get more freedom than a renter. The buyers can change the look of their home, renovate it, and upgrade appliances. They can also be a pet parent, which most landlords restict or disallow.

These freedoms are a big part of why owning a condo appeals to them.

Common Questions About Condominium

What are the main differences between a condo and an apartment?

Condos are individually owned units within a larger complex, whereas apartments are typically rented units owned by a landlord or property management company. Condo owners have more control over their units and are part of a homeowner’s association.

Can I make renovations to my condo?

Yes, with limitations. Interior modifications are usually permissible, but changes to the exterior or structure may require approval from the homeowner’s association due to shared ownership of common areas.

What are HOA fees and what do they cover?

HOA fees are monthly charges paid by condo owners to cover the maintenance of common areas, amenities, and sometimes certain utilities or insurance policies. The exact coverage can vary depending on the specific condominium complex.

How does owning a condo affect my taxes?

As a condo owner, you’re responsible for property taxes on your unit. These taxes are similar to those paid by owners of single-family homes and are based on the assessed value of your condo. Property taxes may be tax-deductible. Consult your tax professional.

Is living in a condominium suitable for families?

Condos can be suitable for families, offering amenities and a sense of community. However, space and privacy considerations are important to evaluate, as condos are often smaller than single-family homes and living is more communal.

Can I rent out my condo?

Yes, you can rent out your condo, but it depends on the rules set by your homeowners’ association. Some homeowners associations have restrictions or specific requirements for renting out condos, such as minimum lease terms or approval processes. Check your community’s regulations before planning to rent out your condo.

Is it smart to live in a condo?

Condos offer the benefits of homeownership without the maintenance responsibilities of a single-family home. They often come with amenities like pools and gyms and can provide a sense of community. Financially, condos can be more affordable and can appreciate in value, though usually at a slower rate than detached homes. However, it’s important to consider factors like homeowners’ association fees, homeowner rules, and the potential for special assessments.