Condo as primary residence: does it ever make sense?

[Ricky]

First let me start off by saying that I love the idea of a condo. It's an efficient use of space with apartment-style maintenance levels. It's convenient. It's usually fairly centrally located. There is a social aspect.

But...the math just doesn't add up.

Of course if depends on the area, but let's just assume medium size city since the numbers get worse usually in large cities. A nice 1/1 condo might go for $100k here in NC.

If you pay cash, you have $4k/yr roughly in investment opportunity costs, $1,100/yr in taxes, and let's just say a $150/mo HOA fee (probably being generous). Not to mention any type of extraneous maintenance costs that will typically be much less than a house, but still present. $500/yr for good measure. That's  $7,400 conservatively per year, or $616/month.

If you finance, that's $800/yr in opportunity costs immediately (then grows as equity grows). $372/mo for principal/insurance, same HOA, same taxes. That's $680/month. So you might as well finance in this situation.

Still, $680 is a lot for something you "own", and I would consider this to be a decent deal as well. It should be fairly easy to find a 1 bed / 1 bath apt. for this amount or just slightly more? Even if it was $100 more, wouldn't the flexibility be worth that much?

Curious if anyone has ever actually ran the numbers on their condos and found if they were saving (or not) a significant amount by owning? Do you find its worth it in other ways?

[thedayisbrave]

Well if you're going for a 1B/1B, then no the numbers usually don't make sense.  In the end it just depends on your pride of ownership and how important getting a "rent controlled" apartment is if you plan on living there long term.

I have two condos and have lived in both.  The smallest is 3 bedrooms.  I rent out the other 2 and live rent-free and cash flow on top of that.  I got it for less than $100K.

[mschaus]

Yup, "owning" a place still requires a good bit of cash flow. I'd say your numbers are on the right track for how to compare. The other consideration is renting an equivalent property and the impact on your wealth from all three options. Also differences in required cash flows. This article goes right along with that:

http://jlcollinsnh.com/2012/02/23/rent-v-owning-your-home-opportunity-cost-and-running-some-numbers/

The analysis will come out very differently depending on where you live. I'm in downtown Chicago where buy/rent is neck and neck pretty often. Indeed, the HOA fees can be killers.

[Bearded Man]

I think if you like the amenities and they are important to you, yes it can make sense. If my old apartment that I lived in for 10 years was available as a condo, I'd buy it. It's a gated community, literally within walking distance to EVERYTHING: transit, stores, entertainment, college, etc. Nice area.

But recently I looked at buying a condo paid in full but decided against it. Usually, having a paid off place to live plays in your favor. In my case, it seemed like a good thing to do until I considered how much it would cost to just live in an apartment and not take the opportunity cost of having investment cash tied up like that in a condo. Turned out that I was actually better off just renting an apartment. My expenses would be about the same but my investment income would be higher.

Another thing. People always dog condo fees. For the right condo HOA, the fees are fine. I see a lot in my area ranging from $250 - $400. I think at $250 including trash, water, sewer, pool, hot tub, and exterior maintenance covered, you are golden. Yes there might be special assessments, but you would have similar expenses owning a house unless you want to live in a dilapidated one.

[thedayisbrave]

Another thing. People always dog condo fees. For the right condo HOA, the fees are fine. I see a lot in my area ranging from $250 - $400. I think at $250 including trash, water, sewer, pool, hot tub, and exterior maintenance covered, you are golden. Yes there might be special assessments, but you would have similar expenses owning a house unless you want to live in a dilapidated one.

This.  My current HOA fee is $200/mo.  That includes water, sewer, neighborhood pool access, dog clean up/walking area, garbage pick up, landscaping, building insurance/maintenance, and basic cable.  I think it's a pretty good deal.  The biggest things I have to worry about are the appliances and HVAC.

[Emg03063]

Someone posted a comment somewhere on this board (I think) that stuck with me.  They said, "you are naturally short housing.  When you buy a house to live in, you are covering that short position."   Whether renting for life makes sense to you or not really depends on your comfort level with the uncovered short position (to put it in trading terms).

[SnackDog]

Millions of people all over the world live in condo-style arrangements (ownership with common facilities and monthly fees) including most of larger cities.  In fact it is far more common than individual home ownership, which is pretty much a North American thing.  It makes a huge amount of sense because of all the shared costs and economies of scale.  100 families sharing a single 20 story building can do it far more efficiently than they can building 100 houses with 100 roofs, garage, sewage systems, gardens, etc. 

What occurs to me is that people in such arrangements should have "pool cars".  The condo fee should include optional access to vehicles kept in the garage.  Reserve the car online and it's yours whenever you need it.   

Our current building has 8 occupants including the landlord.  Most of us have cars. The landlord has 3!  Most don't get driven every day and at any given time there are 3-5 sitting in the garage. They are never all out.  We should be sharing!  This would also eliminate the need for a jockey to park them all and bring them out - one would just jump in the one nearest the door.

[mozar]

I think my situation is a bit unique,

[ivyhedge]

In severely capacity constrained areas, yes condominiums make sense. We are so deep in the money on "appreciation" that we have paid for our parking, fees, and years of ancillary costs (and two major construction projects) after two years. We also rent our parking space for downtown rates since we're just outside of the Boston core. For reference, our fees are a multiple of yours and our unit is almost an order of magnitude greater. Granted, ours is a select group.
That said, oftentimes condo living saves time: precious time. As two high level professionals, we value that above most else. We used to transit 1hr+/each way. Now we ride/walk 12-14 minutes: every day. We would/will pay more to maintain that. Condo ownership is like any home ownership: most folks think they are "in the money" ... just because. They rarely account for repairs, upgrades, taxes, etc. They lag.

[Ricky]

In severely capacity constrained areas, yes condominiums make sense. We are so deep in the money on "appreciation" that we have paid for our parking, fees, and years of ancillary costs (and two major construction projects) after two years. We also rent our parking space for downtown rates since we're just outside of the Boston core. For reference, our fees are a multiple of yours and our unit is almost an order of magnitude greater. Granted, ours is a select group.
That said, oftentimes condo living saves time: precious time. As two high level professionals, we value that above most else. We used to transit 1hr+/each way. Now we ride/walk 12-14 minutes: every day. We would/will pay more to maintain that. Condo ownership is like any home ownership: most folks think they are "in the money" ... just because. They rarely account for repairs, upgrades, taxes, etc. They lag.

So, a bit confused, are you a proponent of condos or a proponent of living centrally with a short commute? Apartments (renting) have all the same benefits of condos (owning) except there is more flexibility in moving if your office moves or you get a new job all together. And you do own a condo? Still can't tell from your post?

I have two condos and have lived in both.  The smallest is 3 bedrooms.  I rent out the other 2 and live rent-free and cash flow on top of that.  I got it for less than $100K.

I definitely think it can make sense as an investment. I could see myself doing what you're doing. The returns may not be as high as a SFH but you're also getting a lot less headache and a better location probably. I was considering it as if I were using it to live in alone (or with S/O, whatever).

What occurs to me is that people in such arrangements should have "pool cars".  The condo fee should include optional access to vehicles kept in the garage.  Reserve the car online and it's yours whenever you need it.   

Maybe you need to start a business and follow through with that idea? I've thought about something like that myself. People are obviously willing to pay for dedicated office space in a "hip" environment. What if you just added a kitchen and some bedrooms and shared car access? I think we're onto something.

[ivyhedge]

...We are so deep in the money on "appreciation" that we have paid for our parking, fees, and years of ancillary costs (and two major construction projects) after two years. We also rent our parking space for downtown rates since we're just outside of the Boston core. For reference, our fees are a multiple of yours and our unit is almost an order of magnitude greater. Granted, ours is a select group.

 And you do own a condo? Still can't tell from your post?

Indeed.

[curlyfry]

We have a car share at our condo, though I'm not sure if anyone uses it (we are not directly downtown). Could see it being a big draw for those who work & live downtown. 

I am also considering approaching our landlords to see if a smoke-free building has ever been discussed. A lot of the new builds are smoke-free on the entire grounds & I feel that is a big plus as well (currently a few smoking renting neighbours are the main thing that makes me decide i do not want to put an offer on the condo that I rent).

[peoria]

In 2000, I purchased a well maintained 2 bedroom/ 2 bathroom condo for $72500 in the phoenix, az area. 
I was coming from a 2br/2ba apartment in the same neighborhood in similar condition @ $750/month rent.

I put $5000 down, and even with the $20 PMI payment and my 6.75% mortgage, My mortgage came to $458 a month.
My condo HOA fees were $115 an month and covered home owners insurance enough to satisfy my mortgage company.  ( I did end up getting insurance similar to renter's insurance that was $12 a month).
My taxes were $400 a year or $34 a month.
Maintenance was a total of $200 over the 6 years i owned it or about $3 a month. ( everything outside was covered) I had to replace a couple toilet flappers, painted some cabinets that I didn't care for the color, one air conditioner service call, and one bathtub faucet that was leaky.  ( I did also have a pipe break under the concrete and My hoa had to take care of that as well as water removal from the carpet above it).

My total monthly cost of living there over the 6 years I owned it was $622 vs the $750 at a similar apartment. I saved $128 per month over renting.

In early 2006 I sold the condo for $140000, and moved in with my boyfriend, netting about $55000 after fees associated with buying and selling the condo.

In 2009 I could have bought a condo in the same complex for $32,500, and today they sell for about $77000, so yes, I happened to time the market right for appreciation.

I however did not time the market correctly for my interest rate of 6.75% and also made the mistake of not putting 20% down, and therefore paid PMI.

My Hoa fees included all exterior maintenance, insurance, maintenance of private roads, water, garbage, sewer, swimming pools/ hot tubs/ bbq's/ pool restrooms and their maintenance. 

Other benefits over my apartment:
My condo complex was only single story vs all apartment complexes in the neighborhood were 2/3 story. ( o upstairs neighbors to hear).
My condo was made by a quality builder and had excellent sound proofing between condos. I had a neighbor with 3 dogs that i never heard while in the condo.
Neighbors were more long term in my condo complex vs the apartment complex, which to me made for a friendlier environment.
I shared the condo with a roommate the entire time. While I chose to only charge the roommate exactly half of everything, I could have charged them half of what a 2 br/2br apartment would have cost them elsewhere, thus lowering my costs even further.
 

So, in my case, owning a condo was a great decision for me.

[mshighrise]

My husband and I decided a few years ago that the best place to raise our family was in a condo and not in a SFH. First, let me say that we owned a SFH for about five years and it carried lots of costs. There were the recurring costs: maintenance, gutters, landscaping, HVAC cleaning, insurance, water, heat, electricity, property taxes, security, snow removal, etc. Then there were big irregular costs like repainting and repairing the front/back porch, a new roof, new furnace. The biggest costs to me were time and pressure. I don't enjoy yard work, shoveling snow or waiting for the Cable guy or a package all day. Not very DIY, I know...

I hear folks complaining about HOA fees without calculating the hard and soft costs. We currently live in a high-rise and our fees cover hard costs like common insurance, heat, water, snow removal, garbage, landscaping, parking for one car, annual chimney cleaning, gym, bike storage, and basic cable. We don't run the air conditioning very often because our place doesn't heat up like a house - no hot sun beating down on our roof. We no longer need a security service. There is an on-site engineer who is enormously helpful. Unlike our SFH, our high rise is in the middle of everything - parks, transit, restaurants, groceries. So one car is plenty and we walk substantially more.

We live in a building that limits rentals and there are tons of kids. Many families are here for the long haul. That has given us a strong sense of community with lots of impromptu playing in the park and drinks with neighbors on the weekends...no different than when we lived in a SFH.

There are savings in less predictable ways. We have just enough space for our family so we don't accumulate lots of stuff. There's just not room. We also don't need to furnish rooms that are rarely used. We staycation more often because we live in the heart of the city and so many exciting adventures are just steps away.

Living in a condo is really a lifestyle choice. Going back to a SFH would be tough for me at this point and certainly cost more in terms of my time.

[Dicey]

I bought a 2+1 880sf condo in 12/1996 for 120k. Sold it 8/2001 for 260k.
Next, a 4+2.5 1700 sf townhouse in 8/2001 for 390k. Sold it 4/2013 for 600k.

Condos and the like tend to appreciate best in high COL areas.

Best advice if you're going to buy anywhere with an HOA is to get on the board! Assuming, of course that you do your due dilligence before purchasing and only buy into a location that has fully funded reserves and no obvious deferred maintenance.

[ivyhedge]

Best advice if you're going to buy anywhere with an HOA is to get on the board! Assuming, of course that you do your due dilligence before purchasing and only buy into a location that has fully funded reserves and no obvious deferred maintenance.

Yes, but when you are on the board you take on the responsibility of a lot of information for zero income (can be complaints or demands for improvements). I am the chair of our investment committee and am somewhat isolated: that's close enough!

[rafiki]

I bought a condo for myself a few years ago. It's a small 1/1 in a desirable location in my town. The purchase price was around $50k after some basic repairs needed to be made, association fees are $300 a month, taxes and insurance are $1,500 a year (combined) and my mortgage is tiny. My condo fees include trash, water, and basic cable.

I currently rent it out for $1,100/month. I rent it out furnished for short term rentals. It generates a small profit (although with a $300/month association fee, it will never cashflow like a similarly priced SFR) and I've been able to deduct the expenses from the income. Last year it was rented out for 6 months and I ended up with a small loss - which was helpful come tax time. Conservatively it has appreciated to 75k. Based on the location it will continue to rise in value over the long haul. Worst case scenario it should at least pace inflation, but given the location and a long enough investment horizon, I think it will do better than that.

The association is frugal and well managed. There is no swimming pool, club house, etc. Very simple. There have been some substantial assessments in the past to replace the roof, and eventually there will be others, but you are paying for capital expenditures with a single family house as well.

If I could go back and do it again I would. I would have bought more units there if I had the means. Once the mortgage is paid off the annual expense is say $5,000 plus repairs and capital improvements. With the AC recently replaced there isn't much else to repair within the unit itself. The condo includes a covered parking spot, is on the top floor, the entire building is made of concrete block, and is very quiet. If the "shit hit the fan" and I took a big loss in income, got kicked out of my SO's house, etc, I'd stop renting it and have a stable and inexpensive place to live. Everyone needs a roof over their head so the "opportunity cost" of the 50k tied up in it wouldn't cause me to lose much sleep at night. Plus I would homstead it (and save some money on my property taxes) and it would be largely creditor / judgment proof.

I think a condo can make sense if you buy it right, but it's not for everyone. The key is finding the right deal at the right price.

[curlyfry]

Would most of you limit your purchases to buildings with a restriction on rentals?

The 26-unit building that I rent in is likely only 5 owners & 21 units rented (to mostly students & young couples) & that concerns me.  (Though it's also nice to know it is easy to rent!)

[ivyhedge]

Would most of you limit your purchases to buildings with a restriction on rentals?

The 26-unit building that I rent in is likely only 5 owners & 21 units rented (to mostly students & young couples) & that concerns me.  (Though it's also nice to know it is easy to rent!)

Absolutely - if you're in an education-heavy (or finance) area.

[curlyfry]

Not sure I understand your comment - do you mean there should be a limit on rentals especially if it is in an area where there are lots of colleges?  Not sure what you mean by finance area?

[fartface]

So...my CW just purchased a condo for $400K...yes FOUR HUNDRED THOUSAND dollars. And it gets worse: after purchase she spent ANOTHER $100K to fully remodel kitchen, baths, etc.

I think she is ABSOLUTELY nuts. I mean that's insane -- for a CONDO.

She has two yippy dogs...said the HOA is already giving her a hard time about them. Her yard is tiny so the dogs have nowhere really to go. Now she's considering an electric fence. One of the dogs has been sick: barfing, peeing, shitting everywhere...yeah half million dollars for that. Aaarggh.

I asked, "Why did you do this? Why not remain in your lovely (paid off) home with private backyard?"

She said to avoid the hassle of maintenance/yard work/snow removal. Uh...pretty sure for the steep HOA fees she's paying she could easily hire landscaper, handyman, and snow plower.

[ivyhedge]

Not sure I understand your comment - do you mean there should be a limit on rentals especially if it is in an area where there are lots of colleges?  Not sure what you mean by finance area?

Yes. We are in Boston - Cambridge. Lots of nearby complexes have had issues with underage "renters". It is imperative to avoid buildings where parents sign leases for those who would otherwise be disallowed from renting (undergraduates). Feeder areas in high finance (Boston, NYC, Chi) can compound this because units tend to have shared apartments full of (admittedly potentially overgeneralizing and anecdotal) dudes and all that brings (was an issue in the Globe a few times)...Watch out for high rentership. In fact, many banks will not lend above a certain percentage (generally governed by local or state/commonwealth covenants).

[stlbrah]

I think it is.

I value my time, and my $156 fee is a good deal to me because they do a great job. They refurbished and repainted my deck last year and clean the vinyl siding regularly.

I , however, don't think I would want to raise kids over 4 years old here. No actual backyard = too likely to get hit by a car.

[dess1313]

I have a condo.  I dont mind doing yard work, but it was what was affordable when i was looking at the housing market.  Would i buy one again?  probably not, but this works well for me right now. 

Always be mindful of how strong a reserve the condo group has, and what fees COULD go up to.  Not what they are now.  For years here, the group had not raised fees much(was about 180 for snow, lawn, water and maintenance), so we now have a low reserve, and are having to increase fees quite a bit(almost up to 290) due to big projects like fences and roof replacements that need to be done. 

For those here for 15+ years it was great and cheap as hell.  Me, i'm only in about 7 years so i'm seeing the worst of the raises.  There can always be special assessments done as well if you have major issues come up suddenly or your board decides to change something costly.  Beware of places with pools, or other wise expensive luxury items that may need frequent and expensive repair/replacement.

Its right for some people, but not all home associations/condo boards are nice and frugal and easy to get along with.

[ivyhedge]

Our fee is worth it, too, @stlbrah. We would not have bought here were it not.


I cannot imagine what FF thinks of us: his CW (I don't know what that is) got a "deal" compared to the cost of our unit (with her renovations, and presuming one wants to live in WI). To each one's own; at my age, I realize that folks' situations are vastly more different than I ever imagined when I was a pup.

[Rubic]

I own and live in a condo and love it.  I'm within walking distance of plentiful resources. Living in a condo isn't for everyone, but if you don't mind living in an apartment you probably won't find condo living more difficult as a lifestyle.  I'm living in a great neighborhood for a fraction of what it would cost to own a house.

In addition to low maintenance, mostly handled by the HOA, I'm happy that I can leave town for any reasonable period of time (measured in weeks) and I don't need anyone to "house sit" my home while I'm away.

Everyone's situation is different, but I specifically looked for a condo after living in an apartment in the same neighborhood for years.  YMMV.

[Dicey]

Best advice if you're going to buy anywhere with an HOA is to get on the board! Assuming, of course that you do your due dilligence before purchasing and only buy into a location that has fully funded reserves and no obvious deferred maintenance.

Yes, but when you are on the board you take on the responsibility of a lot of information for zero income (can be complaints or demands for improvements). I am the chair of our investment committee and am somewhat isolated: that's close enough!

I see your point, but at the very least one should make the commitment to attend every single board meeting. That won't get you any voting rights, though. In my first condo, there was going to be an assessment equal to 1.5 mortgage payments to replace the roofs. I simply asked if all of the roofs really had to be replaced all at once. Mgmnt. Co. checked with roofer and lo and behold, the answer was no. The roofs were stable enough to do 1/3 at a time, therefore no need for special assessment! Was that worth my time? Hell, yes!