Is a Condo better than renting at an apartment?

Question

Hey guys,

I'm a young entrepreneur (in my 20's) and I came across Bigger Pockets a few months ago. It has opened my eyes to this world and I want to thank Bigger Pockets for this community. Anywho, my gut feeling is telling me that I can at least not throw away the $700 a month that I'm paying for an apartment right now by buying a condo to live in. I'm looking at $60k-70k condos and after running the numbers (with 2% property tax's and a $250 HOA fee) it seems as though I'll be not only saving about $150 per month but that I may build some equity as well. What do you think? I have never invested in Real Estate but I want to eventually invest. But right now, I'm most concerned with my budget of purchasing real estate as a primary residence. Thanks so much for the opinions. I know Single-Family Homes are probably a better idea, but realistically, the Single-Families in my city that are in decent school districts and in decent shape go for about $110-120k which is out of my budget for my primary residence at this time.

Patrick

Rick Alvi · Answer

Thanks Stuart!

I was hoping for conventional financing and almost assumed it. I definitely need to do a lot of research. I appreciate the tips!

Stuart Birdsong · Answer

I think you will get a lot of opinions on this, many of them worthwhile. I, personally, am not a fan of condo's as the HOA's are very unpredictable and can drastically impact your value and your exit strategy. In addition, condo's that are non-warrantable can negatively impact your lending capabilities. I am not telling you that you shouldn't purchase a condo for your primary, but if you can save money over the next year and purchase a Single family home next year, I would wait and buy a more stable investment. If you do end up being serious about purchasing a condo, do your research on the stability of the HOA. I would make sure they have the reserves to make significant repairs when they are needed. Otherwise, you will pay monthly HOA dues and still have to pony up for the major expenses, like roof, siding, paint, etc... Also check the Owner Occupant levels to make sure that you can get conventional lending on your purchase. Also, make sure that you can rent it out as part of an exit strategy. These are just a few thoughts. I don't mean to sound negative on Condo's, but I think sometimes the barrier of entry (List Price) makes them seem appealing at first. Just understand the downside to them, and if you can live with that, then it may be a worthwhile purchase. If not, save your money for something better. One last thought, just because interest rates are low that doesn't mean you should act now. Act when the right opportunity comes along and it fits in your long term goals. Best of luck to you!

Stuart

Is a Condo better than renting at an apartment?

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