Buying a Condo vs. Renting: What's Best For You?
The question of whether it is better to buy or rent a condo is a challenging one to answer. There are pros and cons to both choices, and ultimately the decision depends on each individual's circumstances. However, there are some general considerations that can be helpful in making the decision. Read on to learn more about a few factors that can help those in the market for a condo make an informed choice.
If You Own a Condo, You Can Rent it Out
While renting has definite perks, buying a condo is undoubtedly the way to go if investing in a secondary residence or a vacation home. Owners can always rent it out and earn passive income whenever they're not using it. And it's likely to earn superb returns. Take a moment to calculate your estimated mortgage payment; some renters and buyers might find that the difference in monthly payments isn't as much as they thought.
Condos in excellent locations pull in crowds of adventure-seekers and nature lovers who want to pursue outdoor activities or explore local attractions. These factors make it attractive to tourists year-round, facilitating a flow of potential vacation condo renters every season and, as a result, fantastic profits for rental condo owners. What's better is that owners still get to enjoy the condo whenever they need it.
To make it even more attractive to renters, consider the condo's location, amenities offered, size, and condition. Since it's essentially an investment property when it's rented out, review the rental income history (if any) to evaluate potential profitability.
If You Own a Condo, You Can Build Equity
Unlike renting, buying a condo allows the owner to build equity. In addition, in high-demand areas, owners may be able to grow home equity much faster than they would in other areas. That means with consistency in mortgage payments, a condo buyer can soon use their equity to refinance and complete their current mortgage, gaining complete ownership over the unit. For those renting out their condo, renters are essentially paying the owner's mortgage payments.
One can also use the funds to remodel or make upgrades that make the condo more attractive to renters and increase profitability, or buy a second investment property. Owning rather than renting also allows more personalization of a space; for example, building a sports gear closet to maximize space in the condo. In a nutshell, there are plenty of perks in building equity in a home, and buying a condo is a great first step to start enjoying them.
If You Rent a Condo, You Can Avoid Homeownership Costs
While buying has its benefits, renting a condo has its share of advantages, too, one being that renters don't have to worry about homeownership costs. Since most condos in the area are part of an HOA or condo-owner community, owners are often expected to pay an annual HOA fee to cover condo maintenance responsibilities and ongoing community projects. The fees might also cover waste pickup, water, and sewage management services.
While the exact monthly fee varies depending on the community and the condo, HOA fees can range between $200 and $300 per month. Besides HOA fees, owning a condo also makes one responsible for homeowner's insurance and ongoing indoor maintenance expenses. When renting a condo, renters can avoid such costs.
So, Should You Buy or Rent a Condo?
Even though the better option between buying or renting a condo typically comes down to individual needs and situations, buying often offers excellent benefits over renting. For instance, while the upfront costs might seem high, owners stand to save more in the long run when they buy a condo since long-term renting can be quite expensive. Although buying comes with homeownership costs, renting the unit out and using part of the profits to cover HOA fees and other similar expenses is a popular method to offset them.