Perhaps you’re young and are looking for your own place to live. You’ve moved along in your career enough to know you could afford to own something in your name but aren’t sure if you’re quite ready to take a leap and buy a house. This leaves you facing the decision of taking an intermediate step of buying your own smaller place or renting somewhere. In other words, choosing between a condo vs apartment.
But what are the differences between a condo and apartment? Are they the same thing? Why would you want one over the other? Read more to see which is the best fit for you.
What is a Condo?
A condo, or condominium, is a private residence that can be owner-occupied or rented by a landlord to a tenant. It is typically located within a residential building and part of a larger community.
If you are not the condo unit owner, then you rent from a landlord, who has full say as to who is approved to stay in the unit. Within the walls of their unit, owners have decision-making discretion.
Further, when condo owners lease or rent their units to tenants, they can qualify to take special tax deductions available to people employed in a trade or business. Some examples include items like depreciation, insurance expenses, utilities, marketing, maintenance and upkeep.
Outside the unit, condos are subject to homeowners’ association (HOA) bylaws and must have decisions affecting the entire complex made collectively.
Often, there is an elected board of directors which oversees investments, activities, events, and other important decisions affecting the condo complex.
What is an Apartment?
When most people think about renting, they tend to think about apartments. An apartment is a single unit inside a multi-family building, multi-unit complex, or other development which is owned by someone other than the occupant.
The apartment is leased to tenants for the purposes of earning rental income and is not intended to be owner-occupied.
When you live in an apartment, you pay for rent under a defined lease or other legal agreement. Depending on arrangement, you may also pay for utilities, but this varies based on leasing agreement.
You may have the option to pay directly from your bank account, through check, a debit card or even a credit card.
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What is the Difference Between a Condo and Apartment?
In the purest sense, condos represent a form of ownership of one dwelling in the proximity of other units. There are multiple forms of condos, such as townhouse condos, apartment-style condos, and even detached condos.
What are the Rules in a Condo vs. Apartment?
While rules can be stifling, they can also be useful for maintaining a property’s livability and attractiveness. Because of this, it is important to follow them and stay on good terms with the condo complex or apartment building.
In a condo complex, there is a board of directors which acts as management over the shared areas and enforces applicable covenants and by-laws. Each owner is a member of the homeowners’ association.
In some instances, condo boards hire an external property management firm to handle the administrative functions.
The board will instead perform executive functions such as administering funds, supervising maintenance projects for the building, or documenting discussions and agreements made with service providers hired for the benefit of the condo complex.
Regarding voting on condo matters, multiple arrangements can be stipulated to in the condo’s by-laws. It is common to see voting power assigned by square footage owned relative to the whole development, equal representation (1 vote per owner), or other means.
In an apartment, you are also subject to rules set by the property owner. For instance, there may be rules against throwing pizza boxes down the garbage chute, not properly disposing of pet waste, or leaving weights unracked after use.
In both cases, not following these rules can result in fines. However, in the case of an apartment, violating the rules enough times could result in eviction or other disciplinary action.
Where Can I Find Condos and Apartments?
Real estate listings can be found in multiple places these days due in large part to the ubiquity of the internet. It’s easy to check Craigslist condos for sale, or Zillow apartments for rent.
Each platform also offers other services to assist potential home buyers or interested renters with marketing mixes suited to an individual’s needs.
You can simply sort through Craigslist apartments for rent in your area by using their search tools and filtering your results.
While not always the most robust filtering service, given some listings lack the necessary detail you want, it can still provide a good idea of the apartments for rent in your area.
Likewise, when using Craigslist to find condos for sale, you can search for available listings to get an idea of the marketplace. When I looked for my place, I merely typed “condos for sale near me” into Google and sorted through some Craigslist postings which appeared.
After applying a few quick filters to narrow my search, I found my condo and directly contacted the seller. Other great places to look are Redfin’s homes for sale and choosing to look at condos only.
For those who are looking at apartments, Redfin, Zillow, Craigslist, Hotpads, Trulia, and other platforms are great for searching. There are countless more options available and these are only a handful I have used to manage my own rental properties.
In our case, we have had the most success using a combination of Zillow, Craigslist, and Facebook Marketplace to promote our rental properties. We hosted an open house through Zillow and found several potential tenants.
For those looking to sell their property, but only for the right price, you should see Zillow’s Make Me Move service. This is a way for homeowners to test the market and gauge potential interest without officially listing their home for sale.
The way it works is once you put a listing on Zillow’s Make Me Move service, potential buyers can contact you via e-mail to discuss further details. As the homeowner, you remain anonymous until you wish to share the information with the interested buyer.
I listed my New Orleans condo for sale on the above sites. My hope was these platforms would broaden my reach and allow me to avoid seeking the help of a real estate professional to sell my property and pay a commission.
In the end, I opted for an agent at a reduce commission and I sold the condo for about what I expected to clear.
Over my 6 years of ownership, I earned a ~20% IRR. I’m quite happy with the return but even happier I sold the condo to help finance the house my wife and I now own in California.
Real Estate Agents vs. Brokers
If you are looking for a space and do not know your market well enough to navigate it yourself, there are likely several real estate agents and brokers available to help you. Knowing which one you want means understanding the difference between real estate agents vs. brokers.
A real estate agent is anyone who has earned a real estate license. This license can be as a sales professional or an associate broker. They have access to listings on the multiple listing service (MLS) and help you to buy or rent a property.
A real estate broker is an agent who has also passed a broker license exam. These individuals have taken education courses beyond the necessary credits needed for passing the real estate agent exam.
The primary difference between real estate agents vs. brokers is that brokers can own real estate firms and/or hire agents to work for them. Using either of these to find a space may be necessary depending on your housing market.
Is it Better to Buy a Condo or Rent an Apartment?
As a condo owner, it might be taxing always needing to handle repairs either for yourself or your tenants. However, if the property value continues to increase and you can tolerate the upkeep, growing your assets and net worth could overshadow the out-of-pocket costs.
Knowing that equity is building will help you sleep at night.
When looking how to increase net worth, consider tracking your net worth with a free tracking app like Personal Capital. The app includes useful tools for tracking your net worth across time, digging into various aspects of your financial picture, monthly cash flow analysis, and more.
About the Author and Blog
In 2018, I was winding down a stint in investor relations and found myself newly equipped with a CPA, added insight on how investors behave in markets, and a load of free time. My job routinely required extended work hours, complex assignments, and tight deadlines. Seeking to maintain my momentum, I wanted to chase something ambitious. I chose to start this financial independence blog as my next step, recognizing both the challenge and opportunity. I launched the site with encouragement from my wife as a means to lay out our financial independence and entrepreneurship journey to reach a Millennial retirement and connect with and help others who share the same goals. I have not been compensated by any of the companies listed in this post at the time of this writing. Any recommendations made by me are my own. Should you choose to act on them, please see the disclaimer on my About Young and the Invested page.
In 2018, I was winding down a stint in investor relations and found myself newly equipped with a CPA, added insight on how investors behave in markets, and a load of free time. My job routinely required extended work hours, complex assignments, and tight deadlines. Seeking to maintain my momentum, I wanted to chase something ambitious.
I chose to start this financial independence blog as my next step, recognizing both the challenge and opportunity. I launched the site with encouragement from my wife as a means to lay out our financial independence and entrepreneurship journey to reach a Millennial retirement and connect with and help others who share the same goals.
I have not been compensated by any of the companies listed in this post at the time of this writing. Any recommendations made by me are my own. Should you choose to act on them, please see the disclaimer on my About Young and the Invested page.