Condo vs Apartment: Discover the Difference

Apartment vs Condo

Last Updated on 07/23/2017 by GS Staff

Q:

What’s the difference between a condo vs an apartment?

A:

Condos and apartments often look the same on the surface. For example, when you think of an apartment you might picture a large building with many floors. On each of these floors are hallways lined with doors leading to individual living spaces.

While this type of building may appear to be an apartment, it may actually be a condo. In fact some condos out there have been converted from previously being an apartment complex. So, how do we differentiate between a condo and an apartment if we cannot tell by appearance? Let’s take a look.

Condo vs Apartment

Ownership

The big difference between a condo and an apartment is in the ownership. If you determine how the properties are owned, that will give you a good indication on whether they are a condo or an apartment.

Condo: The units in a condominium are owned by individuals. Generally, people are able to buy and sell units in a condo complex. The homeowner’s association commonly is responsible for ensuring the maintenance and upkeep of the exterior of the properties. The daily operations of the association are dictated by the condominium bylaws, which are setup when the condominium is first established. As circumstances change, the bylaws can typically be amended to meet the current needs of the condo owners.

Apartment: An apartment is owned by an individual or company. They own all units in the apartment complex and lease out the units to tenants who pay rent. They commonly take care of the grounds maintenance and will handle interior problems such as a broken furnace or a busted pipe. When you own a condo, you are responsible for the interior issues related to your condo unit. The key thing to remember is that the renter has no ownership of the apartment unit. They simply pay rent in exchange for the right to occupy the apartment.

Renting vs Owning

Many people often have to make the difficult choice of owning a condo or renting an apartment. There are advantages and disadvantages to either decision. Below we have presented some of the pros and cons of owning a condo vs. renting an apartment.

Advantages of Owning a Condo

  • Equity: When you buy a condo you take ownership in the property. You begin to build equity in your condo as you make payments on your mortgage and pay down the loan. The more equity that you build, the greater amount of money you will receive on the sale of the condo.
  • Low Exterior Maintenance: Many condo complexes take care of things like cutting the grass, shoveling snow, and replacing the roof of your unit when needed.
  • Amenities: Some condos offer amenities such as access to the complex swimming pool or fitness center.
  • Tax Benefits: As a taxpayer and property owner you are entitled to receive the benefit of tax deductions payments made for mortgage interest and property taxes.
  • Community Roots: When you own a property, you tend to feel like a part of the community. In many cases, people can spend many years in a condo or other owned property where they become an active part of the community. This is not always the case when you rent since it is often a short-term living experience.
  • Fixed Payment: Assuming you obtain a fixed rate mortgage, your mortgage payment (principal and interest payment) will not rise. When you rent an apartment, your landlord typically has the ability raise your rent over time.

Disadvantages Of Owning a Condo

  • HOA Fees: When you own a condo, you pay the price for having things like your lawn cut, your snow shoveled, and the complex pool maintained. The homeowner’s associated charges a fee to provide these services to the condo owners. These fees can be hefty depending on the amenities or services the condo offers.
  • Locked In: Once you take ownership to your condo, it is not easy to just pick up and move. In order to move, you must list your condo for sale and hope someone makes an offer for the amount you are willing to accept. Selling a condo can take several months. You are essentially locked into living at your condo until you are able to sell the property and close the transaction.
  • Restrictions: A condo association may have strict restrictions on certain things that are allowed within the condo. For example, a condo may require you to paint your front door only a certain color or they may allow only a certain number of pets in your unit. Additionally, they may only allow a certain number of units in the condo complex to be rented at a given time. It is important to thoroughly read the condo restrictions before you buy so that you are certain you can live with these rules.
  • Repairs and Maintenance: Anything that breaks down on the interior of your property will be your responsibility to fix in most cases. Unlike most apartments, when something like your dishwasher breaks down, you need to have it repaired yourself.

Advantages of Renting An Apartment

  • Greater Freedom: You are not tied to a mortgage and you do not have to worry about selling the apartment when it comes time to move. You are only responsible for renting the apartment for the length indicated on the lease.
  • Repairs and Maintenance: Your landlord will commonly take care of your interior problems like fixing a broken down refrigerator or air conditioner. They will also be responsible for taking care of the common areas of the apartment complex. There is no need for a lawn mower or a snow shovel at most apartments.
  • Less Costs: When you own a property, you are responsible for things such as homeowner’s insurance, taxes, property maintenance, repairs, and more. You do not directly pay these costs when you rent since you do not own the property. Sure some of these costs are worked into your rent payment by the apartment owner. However, some people argue the cost is much less than when you own a property.
  • No Loss of Value: We realized that property values actually could significantly decrease when we went through the financial crisis of 2007-2008. Since you do not own a property when you rent, there is no concern of losing value of your property.
  •  Perks: Apartments may offer their apartments furnished or offer free utilities as a perk for their tenants.
  • Easier To Obtain: When you go to lease an apartment they may only pull a credit report and ask for proof of income. Purchasing a property is a much more difficult task. Mortgage lenders tend much more strict in terms of the documentation that they require and the approval process. For example, the lender may request bank statements, tax returns, paystubs, an appraisal, and more.

Disadvantages of Renting an Apartment

  • No Equity: You never build equity in the property since you do not have ownership of the property.
  • Restrictions: Landlords often do not want you to make serious changes to the interior of your apartment. For example, you typically are not suppose to do things like change out the carpeting or paint the walls a certain color without the permission of the landlord.
  • No Tax Benefits: You cannot deduct property taxes or mortgage interest like you can when you own a property.
  • Lack of Amenities: An apartment may not have certain amenities that you desire like onsite laundry, covered parking, or a lack of a dishwasher in your unit.
  • Rent Hikes: Your landlord may have the ability to increase your rent over time. Your payment is not securely fixed as it might be if you pay a mortgage.

Final Thoughts

Deciding to rent an apartment vs owning a condo or other property can be a difficult decision for many people. If you are having a hard time deciding whether to rent or buy, you should weigh the pros and cons. You should find out what is important you and go with the best option for your circumstance.