A condo and an apartment are two terms that are often used interchangeably with one another when in fact, there are some pretty big differences between the two, one of which has to do with ownership of the property.
So, how are condos and apartment complexes different? Join the team from BrokerLink as we take a deep dive into high rise buildings below!
What is the definition of a condo?
A condo, also known as a condominium, is a type of real estate ownership where people can own a specific unit within a larger condo complex or building. With this ownership, the owner is also entitled to shared areas throughout the building and any amenities that may be located on the property.
What is the difference between a condo and an apartment?
The main difference between a condo and an apartment lies in the ownership and how the property is managed. Take a closer look at these differences below:
Condominium unit ownership
As a condo owner, you own your individual condo unit within the condo complex and share ownership of any common areas and shared amenities, like swimming pools, fitness centres, tennis courts, outdoor cooking space, and any other condo amenities on the property.
This means that as the condo unit owner, you have the ability to either live in the individual unit, given that it is a private residence, rent the unit out to someone, or put it back on the market and sell it to prospective buyers.
Being a condo owner is a great way to start building equity. However, it's important to note that unit owners need to pay monthly homeowners association (HOA) fees to their condo association and yearly property taxes.
Apartment building ownership
In contrast, apartment buildings are typically owned by a single entity, whether it be a specific corporation or real estate management company. So, rather than having owners for individual units, the apartments on the property are rented out to tenants. The tenants do not own their living space like condo owners, rather they have a lease agreement with the property management company and are required to pay monthly rent to live in the building.
Condo association
Condo complexes and condo communities are managed by a homeowners association (HOA) or condo association. Many condo associations are composed of unit owners and are responsible for establishing building rules for the entire building, managing common areas, and collecting fees for exterior and interior maintenance issues and any necessary repairs, insurance, and the reserve fund through monthly payments that are also referred to as strata fees or condo fees.
Property management company
Apartment complexes tend to be managed by a property management company or a landlord. These companies are in charge of managing apartment amenities, rentals, tenant concerns, and collecting rent each month.
Individual tenants pay rent to the building owner or management company. The monthly rent covers maintenance fees and potentially some utility costs.
Advantages and disadvantages of condos and apartments
In the section below, we will explore the advantages and disadvantages of owning a condo and an apartments, helping you make an informed decision about which option best suits your lifestyle and needs:
Advantages of condo owners
Owning a condo comes with numerous advantages, including:
Builds equity for condo owners
Condo living enables you to build equity over time, which is highly sought after. Should you ever decide to sell your condo units, you'll likely make money and be in a good position to continue investing in the real estate market.
Personalization
Condo owners are able to conduct upgrades or renovations to their units. This is great if you want to personalize your living space and add value to your unit.
More control over the building
If you're a member of your HOA, you'll have more of a say over where your condo fees go.
Shared spaces
Access to shared amenities like a swimming pool, gyms, and common areas, often maintained by the associate, enables you to enjoy your living space without having to worry about the maintenance and repairs involved.
Long term living
Condo buildings are ideal for those looking to live in one spot without the need to move frequently.
Disadvantages of being a condo owner
However, condo ownership also comes with its own disadvantages, which we will explore below:
Initial investment
To become a condo owner, you need to put a down payment on the condo and pay closing costs to a real estate agent.
Fees on top of your mortgage
Monthly homeowners associations fees can be expensive and are in addition to mortgage payments you need to pay each month to your bank or credit lender.
Special assessments
Occasional special assessments may be required for major repairs or improvements. This means that you'll need to pay out of pocket for unexpected issues if the HOA insurance maximum is reached.
Rules and regulations
Unlike single-family homes, where you are fully in control of your property, condo owners must follow HOA rules and regulations. This could restrict certain renovations to your unit and uses of the property.
Rental restrictions
Some condo associations will limit the ability of owners to rent out their condos to others.
Maintenance and repairs
While the condo fees will help pay for any repairs or maintenance that needs to be done to the common areas, owners are responsible for interior maintenance and repairs within their unit.
More financial obligations
Condo owners must cover property taxes and additional condo insurance on top of their monthly fees, which isn't financially realistic for many individuals.
Advantages of apartments
In this section, we will discuss the benefits of owing an apartment:
Easy to move in and out
Renting an apartment offers renters more flexibility when it comes to moving in and out at the end of their lease agreement term. This makes it ideal for those who don't want the long-term commitment that comes with owning condos.
Short-term residency options
Some apartments allow residents to stay for short-term agreements, such as six months or less.
Fewer initial payments
Renting typically requires a security deposit and rent, which are significantly lower than having to pay for a down payment and other costs associated with purchasing condos.
Landlord is responsible
Your apartment's landlord or the property management business is responsible for handling any maintenance costs or repairs, which takes the stress off of the tenants.
Included amenities
Renting an apartment still offers you the ability to have shared spaces with other residents, such as gyms, pools, and laundry facilities, which are often included in the monthly rent that you pay.
Disadvantages of being an apartment owner
However, owning an apartment comes with its own set of disadvantages, which we will explore in the section below:
No ownership of the apartment
Rent payments do not help tenants build equity and it does not give them any return on the investment they have made into living in an apartment either.
Limited personalization of the apartment
Unless your landlord says so, tenants are generally not able to make any significant modifications or renovations to their rental apartment.
Lease terms
Because you're under a lease agreement, your landlord is able to increase your monthly rent payments at the end of the term if they want to.
Less of a community
Apartment communities tend to have a higher tenant turnover rate, which can result in less of a community feeling you would get while owning and living in a condo.
Do you pay monthly for a condo, and what do condo fees cover?
Yes, condos tend to have monthly fees that you will need to pay on top of your mortgage. So, what exactly do these fees pay for? Here's how you can anticipate your money being spent:
Utility expenses
Condo owners share the costs of utility for the entire building. This includes heating and air conditioning, electricity, and water. On top of this, you will need to help pay for maintenance and repairs to any of the common areas throughout the building. This includes paying for concierge services, cleaning services, security, and daily operations to ensure the building runs smoothly.
Furthermore, you and the other units are also responsible for splitting the cost of insurance that provides protection to the building and the shared areas throughout it from damages and liability claims.
The reserve fund
Most condos also have a reserve fund, which is money that is set aside by the condo board for any significant repairs and replacements that are required outside of everyday expenses. For example, this will cover the roof, external walls, windows, and other mechanical systems in addition to additional components.
In order to increase the total value of the property, costs associated with building upgrades will also be paid for out of the fund. For instance, updating the units' heating and cooling systems and making other improvements.
Finally, these condo fees include coverage for unforeseen costs brought on by unforeseen events like severe storms or structural damage.
Common areas
The final aspect to monthly fees owed by condo owners is maintenance of all common areas in the building, particularly the amenities. This money is put towards keeping things like the pool and pool area in good condition, and can also pay for lawn maintenance and other spaces where residents are allowed to gather.
If we're in your neighbourhood, don't hesitate to visit us in person to work with one of our brokers. You can also give us a call directly to speak with someone over the phone.
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What is a special assessment?
Loss assessment coverage assists in covering your portion of the expenses that your condo board may request from all owners in the event that any shared spaces inside the building sustain damage or in the event that liability claims surpass the insurance policy limitations of the condo corporation.
Without your own insurance coverage, you'd be responsible for paying this special assessment cost out of pocket. For example, if your condo lobby is damaged due to a storm and the cost to repair the damage is $200,000, but the condo insurance only covers $150,000 of that damage, the remaining $50,000 would be split by all owners to pay for the remaining amount.
But, with your own personal condo insurance, you won't have to pay your portion of the remaining owing because your insurance company will pay for it through your policy.
Who is an apartment best for?
Contemplating whether or not to purchase a condo or rent an apartment can be daunting. However, there are numerous types of people and scenarios where apartments may be a better option than purchasing condos:
Young professionals entering the job market
Why apartments are ideal for young professionals:
Flexible living
If you're early in your career, there's a chance you may have to relocate to find job opportunities. In this case, renting an apartment offers you the ability to move anywhere, in contrast to being stuck in one area where you purchased your condo.
Affordability
Compared to purchasing a home or condo, apartments are generally more affordable upfront and over time than having ownership. With only a security deposit and rent for one month required up front, for young professionals, this can be more of a financially sound choice than putting a percent down on a condo.
Students
Why apartment maybe a great choice for students:
Temporary living
Renting an apartment is also a great choice for students who are in university. As apartments offer short and long-term living options, students can pay monthly rent for the duration of their program and then move to another area once they are finished.
Proximity to schools
Apartments are often located near university and college campuses, which offers students convenience getting to and from school while reducing their overall commute.
Those who like to travel
Mobility: Those who move frequently for work or to travel around the world can significantly benefit from the ability to end their lease whenever they choose and relocate to another area whenever they want to.
Those who are retired
Repairs and maintenance are taken care of: Apartments come maintenance free, which means your landlord will be responsible for handling any issues within the building and your individual unit. This is great for retirees who don't want to deal with these types of tasks themselves.
Those who are on a budget
Renting an apartment can be more cost-effective that owning condos. This is especially true in large city areas where home prices are high. By renting an apartment you can avoid costs like taxes, home maintenance, and repairs.
Are condos cheaper than houses?
Whether or not condos are cheaper than homes really depends on numerous factors such as the location of the properties, the size of the home or condo, and more. Here's a closer look at these variables below:
Location of the home or condo
In larger city areas, condos can be significantly cheaper than houses because of how expensive the land is in the area.
In a rural area, the cost difference between the two is probably less significant. The cost of a home may also be more affordable than owning a condo in a city space as well.
Size and type of living space
Smaller condos are generally more affordable than single-family houses given that there is less square footage, and the building may be older.
Luxury condos, on the other hand, that feature high-end amenities will be more expensive than smaller homes. Again, this really depends on where you live.
Monthly HOA fees
Condo owners are responsible for paying monthly HOA fees, which covers the cost of maintenance to common areas, any amenities, and sometimes shared utilities for the building. These fees can add a significant ongoing cost on top of the mortgage that they need to pay.
Houses do not have HOA fees, but homeowners are required to pay for any repairs and replacements throughout their home on their own.
Insurance and taxes
Taxes for condos are typically lower than those for houses because they are generally assessed as being less in value than homes.
Condo insurance can also be cheaper than normal homeowners insurance, given that it only covers the inside of the unit they own. Additionally, insurance for any common areas throughout the building is covered by their monthly strata fees.
How can I buy a condo?
If you're ready to buy a condo in your area, congrats! Homeownership is something to be proud of! If this is your first time purchasing a piece of property, you may be confused about the general processes of purchasing a home in a shared building.
While everyone's journey to owning a condo will look a little differently, here is a general overview of what you need to do:
Think about what your budget will be
You first need to assess your overall financial situation to determine what you can afford. Once a budget is set, you can then go ahead and get pre-approved for a mortgage to see what you will be able to borrow from a lender.
Research condos in your area and do your research
Now comes the fun part. Now that you know what you can spend on a new home, you can begin looking for condos in your area. Look in your preferred neighbourhoods and select a building that has good amenities. You'll also want to consider how close the building is to your work and other important locations you travel to regularly.
Get in contact with a real estate agent
Next, you'll need to find an experienced agent to help you with your home search. Consider one that has experience in condos and who knows the neighbourhood you're looking in.
Search for condos
Take a look at online listings and go visit condos in person. Once doing so, you can create a list of your favourite properties before moving forward.
Review the rules and regulations of the condo
Get a copy of the condo association’s bylaws, rules, and regulations. Check for any concerns that may impact your daily lifestyle.
Evaluate the condo board's finances
Ask for the association’s financial statements and reserve fund. Make sure you go with a condo building that has a healthy financial fund and one that is also well-managed.
Conduct a home inspection
Hire a professional inspector to evaluate the overall condition of the condo unit.
Make an offer on your new condo
Afterwards, you can then go ahead and work with your real estate agent to make an offer on the condo of your choice. During this time, you'll have to negotiate the terms of the sale before reaching an agreement.
Secure your financing
Once the offer has been accepted, you can go ahead and finalize the mortgage application with your lender before closing the deal.
Close the deal
Sign all of the required documents that make you the owner of the condo. Once the closing costs are paid, you'll then receive the keys to your new home!
Move into your new condo unit
You now own a condo! You can set a date with your building to move on into your new living space.
Protect your home with customized insurance policies from BrokerLink!
Whether you're a condo owner or renting an apartment, living in a shared community comes with unique risks, which is why it's essential that you have the right insurance coverage in place.
At BrokerLink, we help customers find high-quality insurance policies at an affordable price without having them sacrifice coverage. With locations across Canada, BrokerLink is the go-to choice for Canadians looking for customized insurance policies that protect their interests!
Looking for competitive insurance quotes from the comfort of your own home? Use our online quote tool to get insurance quotes on demand!
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