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Thinking of buying a condo? There are many pros and cons. Here’s how to decide if a condo is right for you.

First of all, what is a condo?

Some might say a condo is a fancy apartment or a home without a backyard. While these two descriptions are technically correct, there is a lot more to consider if you're thinking of buying a condo.

One major difference between condos (short for condominiums) and other living arrangements is that condos have board members. The board members are the owners of the other condos in your community.

These board members (aka neighbors) are responsible for taking care of the common area, lawn maintenance, pool or anything that is within the condo boundaries. These services are paid through a homeowners association (HOA). The HOA can also cover the insurance on the building, share utilities, and manage reserved funds for any large repairs such as pool repairs or a new roof.

When you buy a condo, you are essentially buying the space inside of the multi-individual units—not the exterior walls. That’s because the title does not include anything but your space.

Buying a Condo

Buying a condo can be as easy as getting a home loan. Many different loan types allow the purchase of a condo. In fact, you can even purchase a condo with an FHA loan as long as some criteria are met.

Declaration of Covenants

Beyond loans, buying a condo also means signing a declaration of covenants (complete with fine print!). The covenants outline everything the condo owners need to know and make them aware of any restrictions in the condo’s common grounds. It also contains the rules for selecting board members. This is important for people looking for single-family homes in a condo community.

These rules will outline what may or not be important to you and your family. If there is a clause about pets or how long kids can be at the pool, for example, it will give insight if this community is a good match for you.

What to Look for in a Condo

Knowing exactly what you want when looking for a new home is important when comparing a condo vs. apartment.

You wouldn’t move into a new home or apartment without being happy with (almost) everything it had to offer. When shopping for a condo, be sure to check out all the amenities and calculate the HOA fee into your monthly mortgage.

Living in a condo can bring the world of leisure to your building. Some condos contain luxurious amenities such as an onsite gym, spa, concierge pool, sauna, barbecue pit, and more. For anyone wanting to become a hassle-free real estate owner, a condo is an ideal choice.

A condo vs. house may benefit you more if you’re a retiree, single, newly married, or in school. A house requires a lot of upkeep and maintenance and may not allow for a carefree lifestyle with minimal home responsibilities.

Why a Condo May Not Be Right For You

Condos are owned by a board or landlord. This is important because condo owners do not have the right to make changes unless given formal permission. In your comparison between a condo vs. townhouse, you may find out that a townhouse you're looking at was actually developed to operate as a condo. This will mean a lot of the same rules that apply to condos apply to your townhouse.

If you love your personal space and having the complete freedom to paint and decorate as you choose, then a condo may not be for you. Your condo association may not always approve of things that you find important to make the space your home.

Condos as Investments

Condos make great investments as long as you do your due diligence. Before moving in, find out if the HOA includes your utilities. If they do this can save you money especially if your internet, cable, trash, water, or electricity is included.

Another reason it might be a worthy investment is how badly they need private buyers and investors. If the building is in a desirable location, it could cause a bidding war between investors—helping your investment become more lucrative.

Though renting out your condo is an option, it isn’t a guaranteed paycheck. Whether it’s geared toward newlyweds, single adults, or retirees, you'll need to know the audience you are trying to attract. If you are having difficulty renting it out, try staging it according to your target demographic.

Condo vs. Co-op

While searching for a condo, you may come across communities known as co-ops. If you’re considering buying a co-op, it’s important to know the difference.

One of the biggest differences between a condo and a co-op is that with a condo you own the actual real estate, but with a co-op, you own shares. The co-op board will decide if you can live in the building and will have to approve the person who buys it from you. This can be time-consuming.

Tax Benefits

Tax deductions are more of a benefit to a condo owner than a co-op shareholder because you can deduct the full amount of mortgage interest. With a co-op you can only deduct property taxes on the underlying mortgage of the entire property that is rolled in the co-op maintenance fee.

Condo Insurance: HO-6

Condo insurance is important because anytime a homeowner owns real estate insurance is needed. The lender needs to know the home is protected, which in return protects their investment. In the event of a catastrophic event where the house is a loss, insurance would cover the mortgage ensuring the lender and the homeowner can cover the remaining cost of the house.

Condo insurance, also known as HO-6 insurance, is specifically designed for condo owners. The HOA or landlord will have insurance for the common area and the outside of the property, but anything inside the owner's unit is the owner’s responsibility.

HO-6 covers damage, personal liability, interior walls and floors, and any improvements done in the condo. If you spend any amount of money upgrading the condo and it becomes destroyed, the insurance company will cover the original cost.

Owning A Condo

To be eligible for an FHA loan when purchasing a condo, there are a few requirements, such as:

  • The condo community must consist of two units.
  • 85% of all the condo owners must be up-to-date on association fees.
  • Full-time residents should own at least 50% of the units in the community.

Condos that meet these requirements must submit documentation to be added to an official list of FHA-approved condos. FHA laws are very confining to future homeowners and can limit options to buy a condo with an FHA loan. If the condo association stays up to date with all documentation and meets all requirements it can be very easy for future homeowners to use an FHA loan to buy a condo.

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Purchasing a condo? Do it with a top-notch agent from Clever. Call us today at 1-833-2-CLEVER or fill out our online form to start.


Andrew Schmeerbauch

Andrew Schmeerbauch is the Director of Marketing at Clever Real Estate, the free online service that connects you top agents to save on commission. His focus is educating home buyers and sellers on navigating the complex world of real estate with confidence and ease. Andrew has worked on projects for the United Nations and USC and has a particular passion for investing and finance. Andrew's writing has been featured in Mashvisor, L&T, Ideal REI, and Rentometer.

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