Pros and Cons – Condo vs House
Which is better, to buy a condo or to buy a house? Well, that depends on you and your situation. In this video, I’m going to give you some pros and some cons about buying a condo versus buying a house. For some, it’s better to buy a condo, and for some, it’s better to buy a house. So it all depends on where you are, how much you can afford, and what are your goals of owning a home, whether it’s a condo or a house. So let’s get right into it. One thing I can say before I give you the pros and cons is that condos are a great entry-level to buying your first home. A lot of times a student might have just graduated and starting to work and may not want to rent. And he can buy or she can buy a condo because it’s much cheaper than a home. And you might have student loans and other loans and you may not be able to qualify to buy a bigger house. So it’s a great entry-level point. And like I always say, it’s better to buy some kind of real estate whether it’s a condo or a house. But the key thing is buy when you are ready, willing, and able to buy.
30-year clock starts now, so the sooner you buy, the better it is, regardless of a condo or a house. So let’s get into the pros and cons of buying a condo versus a house. When it comes to the pros of buying a condo, the biggest advantage of buying a condo it is much cheaper than buying a house. In general, homes are more expensive than homes that are condos. A home can be a condo so in this case a condo. And if you look at the chart, an average home costs more than an average condo. The other advantage or pro for a condo is that you don’t have a huge yard, you don’t have your own pool. So your maintenance costs generally are much cheaper than a house. A lot of the maintenance, especially the exterior maintenance, is done by the condominium. You don’t have to spend all that money. Most of the condos have insurance coverage like fire insurance may be covered by association fees.
Also in your association fees, a lot of times, they include trash pickup, they include maintenance, sometimes they include cable. Well, these days it’s a lot of streaming there, but a lot of times cable is included in the HOA.So it just depends on the HOA. But that’s another advantage. The other advantage of owning a condo is that when you are buying one, you generally have more choice in finding a condo than you would find a house. In general, it’s easier to find condos than homes because there’s more available condos than single-family homes because more and more people are looking for homes. A lot of condo buyers may be moving into homes. So there’s less homes compared to condos in general. So that’s an advantage. And less people are looking for condos and more people are looking for buyers. So you have a better choice and you can take your time to make offers or select a home or a condo of your choice. When it comes to the cons of owning a condo, one of the biggest cons is that all of them have HOA. What is called the homeowners association?
In Orange County where I’m from, by the way, I’m Mike Patel with First Team Real Estate. And if you are looking for a condo or need some help, feel free to contact me. My contact info is below. I’ll be glad to help you find a condo or find you a resource or a referral in the area you’re at if you’re not in California. So, talking about HOA in Orange County, the average HOA fees are anywhere from two hundred and fifty dollars to three hundred and fifty dollars. Certain areas of Irvine they have HOA fees of $600. There’s one building in Irvine off of Jamboree that has one $200 a month on HOA fee. Of course, they do a lot of stuff, but that’s still HOA fees. One of the cons of condos is that you have HOA fees. And the other con about having an HOA fee is that when you do qualify for a loan, that HOA fee is to the lender like a car payment. So when you have $400 a month HOA fees, that much home, you can buy less. So that goes against your prequalification or your debt ratio. So that puts an impact on your purchasing power when you’re buying a condo.
Also when you buy a condo versus buying a house. When you buy a house, you own the whole house by yourself. In a condo, you don’t buy the whole building, but you buy a certain amount of ownership of that building. So let’s say you have 1000 condos or 2000 condos that you’re buying. You own that portion of the condo. In some areas in common, you own that much. So you don’t own 100% of that building. You own just part of that building, which is a negative for condos. When you buy a home and if it does not have any association fees, you can do whatever you want to the house, or you can have a pet, or you can have to fix your car in the front street. But when you have HOAs, they have CCNR, which is a Covenant, Conditions, and Rules. That means they have rules and regulations on what you can do and cannot do. Some of the common rules are you can only have a certain size of a pet or you can only have a certain amount of pets. You cannot fix your car in front of the house and make a business out of it. You cannot rent it out as an Airbnb, you cannot paint the colors outside of your condo, and things like that. So there’s a lot of rules and restrictions on a condo, which is not too nice.
But on the other hand, you may be okay with that. So then it’s okay to buy a condo. Also, when you are buying a condo, for example, let’s say you’re getting an FHA loan, which is a government loan, they may have restrictions on what kind of loan they give on certain condos. A lot of the condos, the FHA loan, and some other lenders may look at this is how many units in that condo are rentals. So certain areas or a certain amount of rentals are required versus when you buy a home. There’s no such restrictions. And I know that a lot of the lenders, if 50%of the units so let’s say a condominium complex has 100units and they find out that almost 50% or more are rented out, are owned by rental companies or investors, then those lenders or FHA may not give you a loan on it. So when you do go get a loan on condos, there’s more restrictions than on a house. That’s a drawback that you have when you’re buying a condo. But hey, you can still buy fine condos that don’t have that restriction in that complex.
So if you are looking for a house, some of the cons about finding a house or buying a house is that they’re generally more expensive than buying a condo. But you get more space and more privacy. So that’s a con that is going to be more expensive. Also in general, when searching for a home, on average you have less homes to choose from on the market as compared to when you’re looking for condos. So that’s another con. When you look for a house, you are restricted on your choices, especially in that price range and in the area that you’re specifically looking for. If you own a home, you probably have a yard, or you might have a pool or a spa, or if you have a large yard, you might have a tennis court or basketball court.
In this case, if you’re the homeowner, you on your own have to pay for the maintenance. And believe me, maintaining a pool or a spa or games or yards, in general, is very expensive. You have to maintain it every week, and every month, it gets pricier and pricier. Whereas if you’re staying in a condo and if they have a pool, for example, there’s no cost to you on maintaining that pool and you can use it at no charge. Some of the homes, even if they are single-family homes, do have association fees. Some of a lot of the newer homes where they build 300, 400, 500, or thousand homes in the community, they have what we call HOA fees and some of them have assessment fees. So the bigger your home, the bigger your assessment fees. For example, Mello-Roos, a lot of the new builders in Southern California at least they charge you Mello-Roos, which is a special assessment tax passed on from the builders to the buyers. And the fees are dependent on the size of your home. So the bigger your house on a single-family home, the more assessment fees you are paying.
So that’s a disadvantage if you own a house if it’s a bigger house and that house or that specific house has HOA fees or assessment fees or Mello-Roos fees. So the bigger the house, the more fees you have to pay. Talking about the pros of your owning your own home is that you own a single-family home, you have a distance between you and the other homes, and you have your own privacy. So that’s the biggest advantage that you have. You have your own yard, you can fence it, you can cover it up, and you can have all the landscaping that you want. And when you do landscaping, you don’t have to go ask your HOAs if they do have HOA. There are some restrictions, but most of the time there are much more leaner rules than your condo or townhouse HOAs. So if you have your own house, you can do the yard the way you want it you can paint the house the way you want it and the color that you want. Of course, there are some restrictions, so you check it out if they have association rules.
But you have more freedom to do things when you own a house. If you have a big yard, for example, a lot of these days, especially in Orange County, in La County, and I know a lot of other states, a lot of the homeowners, if they have a yard and if the city and the county permit it, they are building additional ADUs, which is the additional dwelling units where you can rent those out. And the city will help you with the permits and everything. Certain cities have restrictions on it, but that’s an advantage if you have a house and if you have a big yard, you can build an ADU for your own use, or for your family or relatives or in-laws, or you can rent it out as a rental unit and you can have income. The other advantage to a house is that if you want to do an addition, let’s say you have three bedrooms, and two baths, and you want to add another room, or you want to make your kitchen bigger, or you want to make your family room bigger, you can add additional living area to your house. In condos, you can do that.
Even if you have association fees and you own a house with the right permit and right qualifications of the buildings, you can still build it. That’s a big advantage where you can expand your house where you are living and enjoy more of a house than what you already have. The other advantage of a house is that you can rent it out anytime you want and you have less restrictions on the rental if you are in a condo. The other advantage of a house versus a condo is that in a house if I own my own house, I can do business from the house. If I wanted to do a catering business, or if I wanted to do a travel agency, or if I wanted to do an accounting business, I can do that from my house. Of course, there’s always restrictions from the city, and if you do have HOA, there’s some restrictions, but in condos, there’s more restrictions about doing your business from your units than in a house. So that’s an advantage that you can do your own business.
The other thing is it’s much easier to do a rental business like an Airbnb or aVrbo than allowed by your association in a condo. In a house, you can make your own decision and rent it out or convert to an Airbnb. Of course, that’s if you get a permit from the city or county that you are in, because a lot of the cities, like Anaheim I know four or five years ago, a lot of people got Airbnb, and then all of a sudden the city canceled those. So they took a loss and could not rent out their Airbnb. So there are restrictions on renting them out. There is more advantage of renting out your home than if you would if you had a condo. The other advantage and this is a very significant advantage of owning a house that in general, of course, it depends from area to area, but overall, in general, homes appreciate more than condos. That’s one of the biggest advantages.