Condos vs. apartments: Learn the differences and how to choose

A condo is a unit owned by an individual, who either lives in the unit or leases it out. An apartment is a unit in a building that is owned by a landlord. The landlord owns the entire residential building and leases individual units to residents.

If you’re not ready to invest in real estate but you want to experience living in a condo, you can rent a unit directly from its owner. Here are some aspects of condo living to consider when deciding between a condo and an apartment to rent:

• Community and amenities. Condo complexes limit the number of units that can be rented at any given time, meaning that condo communities will be a mix of owners and renters. Condo owners participate in the maintenance of the common areas via the homeowners’ association (HOA), so these common areas tend to be kept up nicely. Condo buildings sometimes also have more luxury amenities than apartments, including onsite parking, pools, gyms, or tennis courts. 

• Landlord. When you lease a condo directly from its owner, you may end up having a more personal relationship with your landlord than you would if you leased from an anonymous property management company. But a condo owner may not be as experienced or responsive as a dedicated management company when it comes to addressing problems with the unit.  

• Condition. Less rental turnover also means that the insides of condos are often in better condition than apartment units. 

• Cost. Added amenities and improved condition aren’t free. The owner may pass HOA fees on to you, effectively adding hundreds of dollars per month to your rent.

In many parts of the United States, the cost of renting an apartment is about the same per month as buying a comparable condo. However, in cities like San Francisco and New York where real estate prices are exceptionally high, the monthly cost of a mortgage can be much higher than the rent for a comparable unit—condo or apartment.  

Even if the monthly payments may be similar, where the money goes breaks down differently for renting versus owning. When you rent an apartment, your rent payment (which may or may not also include the utilities for your unit) simply goes to the landlord (whether that’s an individual condo owner or a huge property developer). If you buy a condo, your monthly mortgage payment is building equity in your home, so every month you own a little bit more of it. 

Comparing the cost of buying a condo versus renting an apartment is more complex than comparing the estimated mortgage payment to the average monthly rent. Here are the most important factors to consider: 

• Upfront costs. The upfront costs involved in buying a condo can be considerable, including a down payment of up to 20% and closing costs that can add another three or four percent to the purchase price. The upfront costs of renting are significantly lower: the first month’s rent and a security deposit usually equal to one month’s rent, plus a similar broker’s fee in some cases.

• Length of time you intend to stay in your home. The longer you stay in your condo, the more these costs can average out over time to bring your overall costs in line with renting. Renting is also more flexible, with less financial exposure if you need to move. Rental agreements may be month-to-month or on an annual basis. Either way, it is easier and less expensive to move out of an apartment than it is to sell a condo when you want to move. 

• Inflation. Both condos and apartments are subject to inflation. When you purchase a condo, you lock in a mortgage rate that keeps your monthly payments the same for the life of the loan. Your HOA fees, however, will increase over time to keep pace with inflation and to account for improvements of the property. Rent almost always increases year after year; the rate of increase is governed by local laws. 

• Responsibility. One of the upsides of renting is that the tenant is not responsible for problems that arise with the apartment. In the event of a ceiling leak or a broken radiator, a renter can call maintenance and the property owner will pay for any necessary repairs. Condo owners are responsible for the costs of any repairs within the interior of their unit. 

In the end, the decision to rent or own is a personal one. It should take into account the upfront and ongoing costs, quality of life, and your own long-term financial goals. 

If saving for a home is one of your goals, opting for an affordable rental while you save can help you get there. Bungalow offers private rooms in shared homes that are less expensive than living alone. Find a room for rent in a Bungalow home here.