Reasons Not to Buy a Condo

When you're shopping for a new place to live, a condo can seem like an appealing and more affordable choice than a single-family home. After all, condos often come with a lower price, offer several amenities and require you to do less maintenance work. However, reasons not to buy a condo range from additional costs and rules to less privacy and space. Understanding the pros and cons of investing in condos and living in them can help you make an informed real estate purchase decision.

While a condo may cost less than a house upfront, you have to factor in the monthly homeowners association fee that you'll usually have to pay for as long as you own the place. This fee can cover your water and trash usage, landscaping and snow removal, upkeep of amenities like pools and tennis courts, building insurance and maintenance of the common areas. Some HOAs even include your cable, heat and electricity in their fees, but this is less common.

Depending on the building, its amenities and your location, you may pay anywhere from $100 to thousands of dollars a month in HOA fees, according to Realtor.com. Typically, you can expect to pay a higher rate for newer buildings with a clubhouse and plenty of amenities than you'd pay for an older building with just a swimming pool and a few utilities covered. If you fail to keep up with your HOA fees, you can face eviction just as you would if you didn't pay your rent or mortgage payments.

Part of your HOA fees typically goes to a reserve fund used for major repairs like roof replacement. However, your HOA may need to charge you an additional fee called an assessment if your building needs a major repair that exhausts the reserve funds. This can mean that you and the other owners in your building receive a surprise bill of several thousands of dollars.

Like with an apartment, many condos have shared walls, meaning you are closer to your neighbors and have less privacy and quietness. This can be an issue if you have disruptive neighbors that you do not get along with or if you live next to someone whose dog barks constantly. Living in a condo also means you have to pay more attention to how much noise you make, so playing a musical instrument late at night or turning your TV up loudly might get you complaints from those living around you.

One of the popular reasons not to buy a condo is that you have to agree to follow numerous rules that your HOA sets. These rules often contain common-sense restrictions like avoiding loud noise, taking care of the common space and only using up a few parking spaces. But they can also dictate minor details such as what color of curtains you may use in your front windows or whether you can hang that Christmas wreath on your door.

In some cases, the HOA rules may not work for your lifestyle. For example, HOAs commonly ban home-based businesses, so if you work from home or have clients visit you, then you'd likely have problems if you moved into a condo. If you want to rent part of your unit out to a friend or someone from Airbnb, your HOA rules may not allow it.

If you're purchasing a condo as an investment or plan to make a good profit when you move out someday, you should consider that condos tend to see slower appreciation than regular homes do. The concept of supply and demand plays a factor into this since more buyers may want a place that has actual land, so you'll see standalone home prices go up more quickly than your condo. Investors should also keep in mind that the HOA fees and assessments can take a large piece out of any profit made over the time of ownership.

You also have to consider that the required HOA fees and restrictions can turn away potential buyers in the future. You may end up having to price your condo lower to attract buyers and make up for the ongoing costs of ownership. You may also find it takes longer to sell your condo.

Another one of the reasons not to buy a condo is that you have less space and flexibility in how you use your place. Some condos offer owners extra storage space or possibly a basement, but you'll still likely have a smaller, more compact living environment than you would in a house. While less space means you have less to clean, it is a downside if you have a lot of stuff.

You'll also not have any land of your own, meaning you won't have a private yard for your kids or a large garden to grow flowers. Condos do often have a balcony or small porch area where you can put a few plants, grill out and sit outside, but you're still bound to HOA rules in what you do in that area.

While you can usually get a mortgage for a condo, you might run into some snags along the way, especially if you want a Federal Housing Administration loan. To qualify for an FHA loan, your condo must be on an approved list, have a majority of the units occupied by owners and be your principal residence, among other requirements. Even if you choose a conventional home loan, factors like the complex's HOA delinquencies, insurance coverage and covenants can affect whether you can get a loan.

Whether you are shopping for your first place or are planning to downsize from an existing property, your lifestyle plays a large impact on whether a condo or house is right for you. Buying a house with land may appeal to you more if you have children or want space to work on outdoor hobbies, but you also have to consider the extra work involved. You may prefer a condo if you want to avoid doing yard work and find the HOA fees and restrictions a good trade-off for the conveniences you get.

Your location preference also plays a part. If you want to live in a busy downtown area, you'll likely find condos more readily available. If you prefer a quieter suburban area, you have plenty of options for houses and can also find condo complexes in most neighborhoods.

If you've decided a condo works for you, it's recommended to consult with a real estate agent to find one that fits your needs. You'll find that HOA fees, proximity to neighbors and available space vary by type of condo, so researching and visiting multiple buildings in the area can help you narrow down your options. You'll also want to request a booklet for the complex's HOA to explore its rules and ensure they're not too restrictive for you.

Lastly, know the amenities and services that are most important to you, such as a swimming pool, 24/7 maintenance, included utilities and covered parking. This will help you choose a complex with an affordable HOA fee and avoid paying for perks you won't use.