Your First Home: a Condo, or a House?

Red HouseSource:

When looking for your first (or subsequent) home, you have one big decision to make before you look further: "Should I get a condo, or should I get a house?" The decision depends on where you are in life, and what you are looking to get out of your new home.

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Condos have become all of the rage lately. Many developers have come out with advertisements stating “why rent, when you could own?”, and the argument does seem compelling with low interest rates, although housing prices in Canada are currently quite high.

First, let’s look at the advantages and disadvantages of living in a condominium versus an apartment, since these are the two most easily comparable.

A condominium versus an apartment

The advantages
  • Most of the apartment stock is old, whereas most condominiums are relatively new. In general, the apartment will be rather ghetto in comparison.
  • For many condos, the total expenses – mortgage principal payments can be comparable to or less than renting a comparable apartment.
  • Presumably, you will be less likely to have troublesome neighbours (troublesome here meaning perpetual drunk, drug addict, etc…) since they would not be able to purchase a condo.
The disadvantages
  • It’s much easier to move out of an apartment and find something else, because you have no obligations beyond the lease, and no real estate agent eating away 6% of your capital.
  • You can rent many apartments for a lot less than what a condo would cost, even if you subtract the principal repayments. These apartments will necessarily be located further away or be of lower quality, but you will save money on the rent nonetheless.
  • If housing prices collapse, you are pretty much stuck with your condo, unless you want to sell at a loss.

What about houses?

There is something about owning a plot of land, having space to lounge about and play, and a place to grow your own garden. With a house, you can have a nice, private space, all to yourself, and you can also be close to nature. The drawbacks can be increased maintenance as well as commute times. Let’s do a toss-up of houses versus condominiums:

Advantages of a house
  • You don’t have to be right up against your neighbours. You can crank up the music, have dogs and other animals as pets, grow your own garden, have your own pool, and more, with less disturbance to others.
  • A house generally offers much more space than a condo, giving you room to grow.
  • A house is usually located in a much quieter location than a condo, which is a plus if you like peace and being close to nature.
  • No condo fees, or unexpected assessments!
  • No need to go up a bunch of stairs or wait for an elevator.
Advantages of a condominium
  • There is basically no maintenance to do of the unit itself. Well-managed condo complexes set aside a portion of the condo fees to deal with maintenance of the building, so that there is lowered risk of a special assessment, where you would have to pay extra.
  • You can be located much closer to the city center and to mass transit for less than what you would spend on a house (if houses are even available close in to the core), thus drastically reducing commute times and transportation expenses.
  • So what if you don’t have your own pool… many larger condo projects have their own indoor pools, as well as a sauna, gym, and recreational room.
  • Instead of selling, you can rent the unit out and get passive income. You can do this with a house, too, but you have access to a wider pool of tenants if you are located in a decent location close to employment and higher education.
  • No HOAs (home-owner’s associations) telling you how often to cut your grass, what color to paint your door, or fining you for forgetting to close your garage door!

So, what do you think? In the end, I believe that it really comes down to personal preference, and it is hard to say that one type is better than the other. Each choice involves trade-offs of one type or another. What is the choice, for you?

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  1. says

    I went from a house to a townhouse (similar to condo) to a house. I hated the condo fees. It’s just a lot of money for the fees that you may never see if you don’t plan on living there forever. The day to day maintenance is managed within the fees but strata council are required to build a certain minimum amount and maintain it. I strongly recommend to read the strata document and understand them. They can differ between condos.

    If I was retired and I had the condo paid, the fees may not be too bad, but think about how much you could invest with those fees.

    On the other hand, a house requires some of your time to maintain it but at least you get to choose whether you spend the money or do it yourself.

  2. says

    I am leaning towards getting a condo when I am ready to move out of my apartment. I think the condo combines the ease of maintenance that I have come to love about my apartment, along with the sense of more space and more freedom that a house gives.

  3. Mike says

    Last home I owned was a condo/townhome. I really liked the simplicity of being able to pick up and leave for the weekend. Also, our community had great resources (natural springs, 24/7 staffed security, great natural park-like surroundings) All that was great.

    But I ended up selling my place in Jan of 07 because the association fees kept going up – a lot more than I could justify. So, while I really like the condo lifestyle (or townhome, etc) I just can’t force myself to write a $300-$500 monthly check. Of course, if the HOAs are reasonable it can be justified. However, buyer has to be aware that those fees can rise. Then again, so can other housing costs.

    Take Care, Mike

  4. says

    During college and directly after, I rented… I hate thinking about all that money I flushed down the drain, but in my mind I was pretty sure I’d be moving to Seattle or Portland some day… My girlfriend at the time (wife now) had other plans…

    So we went with a house when we were thinking about starting a family… It has worked out well, after 10 years the house is paid off and I feel like a financial genius… I chose to ignore the prior 5 years before owning a house (no financial genius then)!

    I have a friend that won a townhouse (I blogged about it…), and she is now looking to buy a $300,000 to $500,000 house while renting out her townhouse. I think her move is pretty darn clever (although I’d be looking at cheaper houses)!

  5. says

    I have a friend in Singapore who’s in the middle of buying a home in Colorado. The area is beautiful, and she is taking advantage of a foreclosure. THe cost? $250,000!

    My folks are from Victoria, B.C., where $250K can’t buy you ANYTHING. Right now I’m envying cash rich Americans buying real estate. We teach in Singapore and we have two months off a year to visit family. My wife is from Pennsyvania, so we spend three weeks there and three weeks in Canada.

    My wife and I were talking about buying a large house with at least 3 suits in it, or a quad: same roof to maintain, multiple sources of revenue.

    Like Mike, we’re not into paying condo fees, and it would be nice to buy something somewhat upscale that we could rent to professionals. We’ve been thinking of Bend, Oregon or Florida.

    Mike, you’re American. What do you think?


  6. says

    Condos can be attractive if the monthly fees are low enough. I know one complaint of some condo owners is that you can barely do anything with the yard. No basketball net, no tomatoes, no fun!

    I actually looked into buying a condo in Florida that would be managed by a company for rentals (it was near Disney). Although the prices on these condos is very attractive now, the association fees were 550/month, which was ridiculous in my opinion.

    We rented an apartment when we were first married as we had zero money for a down payment no anything except maybe a cardboard box. We have since moved a few times and are in our 3rd house. We may be here forever.

  7. says

    I am personally going for the condo option and moving in at the beginning of next year. I feel that I might have spent too much, but on the other hand, it will be similar to or less than our current apartment, and we will get more for the same amount of money.

    There is really nowhere where we could have gotten a house for a similar price, unless we were living to live much further out which would mean 2 cars and longer commutes, or a small, old house closer in. Taking all of the considerations in balance, the condo probably makes the most sense for now, although it is small, too! However, it’s next to a subway terminus, the vacancies in the area are very low, the rents are high, and a new university campus is opening up, so demand will probably increase: With all of these factors together, it could make a decent rental property if/when we do decide to go for a house.

    Compared to the condos downtown, just a few km away, it is also significantly cheaper, and the property taxes are half of what I would have paid downtown. So is the parking space. I would have been throwing away so much money had we bought over there, instead!

    Thanks for all of the comments and feedback, guys.

  8. says

    Hey Kevin!

    Our last home was a condo…my wife and I lived there before we bought the semi-detached home we currently live in. It was downtown and we liked the condo for the most part. I’m with Mike on this one: enjoyed the simplicity of being able to pick up and leave for the weekend; no yard work; 24/7 security; good common elements for a downtown condo such as an indoor pool and whirlpool. With great features, comes great costs. Our condo fees were inching closer to $400/month before we left almost 3 years ago now, and it was a huge factor in doing so. The building was also older (built in 1984) and although our unit had recent upgrades, the common features (A/C unit, windows) were deteriorating. For example, in the winter, faulty windows caused lots of condensation to build up on the inside creating ice patches on them; not fun. Electric heating didn’t help our monthly costs either, probably because of the faulty windows…

    So, while we really liked the condo and the lifestyle it provided, it just cost too much. Condos, in downtown Ottawa, cost much less than a house in the same area but neither are cheap. Unless you’re willing to live outside the city some, you cannot get a decent house under $400,000. I think this decision of yours comes down to a balancing act between lifestyle and cost; I guess like most things. Once you know how you want to live, then you can see if you can afford it.

    In our case, while we liked the condo lifestyle, the scales were tipped in favour of affordable and reasonable housing. Good luck with your decision – let us know what you choose and why. Cheers!

    • says

      Ouch, those were some pretty high condo costs, and I knew that Ottawa was getting expensive, but I had no idea that it had gotten to that point within the city.

      I agree with you though, when it comes to choosing between a condo or a house, you have to balance it between lifestyle and cost. We could have found many cheap homes outside the city, but we would have had to go far, and it wasn’t the lifestyle we were looking for. I do like the idea of a house, but in the end, the scales tip toward cheap condo housing for us. Our condo fees will be about half, and since we have less amenities (no indoor pool, though there is one 500 feet away in a neighbouring apartment complex) and no units that are significantly more expensive than the others, I see less reason for them to rise significantly. It is always a risk, though.

      Thanks for sharing!

  9. Brian says

    Hi everyone, I am from a middle class family debating to buy either a home or condo. I currently live with my parents, whom I bought the house for. Its a large townhome with plenty of room, but its time to get my own privacy especially if you have a 4 year old daughter and a wife that comes from a very disciplined and high position family in her own country. So I have been studying the markets for 1 year so far and I am liking the growth in Vaughan right now, so many condos going up. What I was taught is to start small but think big,,,so thanks to some of my mentors; David Bach, Robert Kiyosaki, I will get a small home live in 3 years then start renting it out to find another property…I am in this market for the long term investment growth. Highly suggest you read; The Automatic Homeowner Millionaire (canadian version) what an eye opener…it is helping me out a lot…


    • says

      Just watch out for interest rate hikes, Brian, and evaluate the profitability if prices lower and rates increase. Prices are high and interest rates are low, and you want to ensure you are protected against a crosswise move.


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