condo vs apartment: what are the differences?

Condos and apartments can sometimes appear identical from the outside, especially if they are part of a big complex or building. When deciding where to live or invest in real estate, it’s important to understand the differences between property types. In this article, we’ll take a closer look at the differences: condo vs apartment.

What is a Condo?

A condominium (condo) is a type of individually owned multi-unit property. This implies you own the unit you reside in as well as a portion of the building’s or complex’s common facilities and amenities. Condos are often situated in big buildings or complexes and often include amenities shared by all residents such as swimming pools, gym rooms, and playgrounds.

What is an Apartment?

An apartment is a multi-unit residence that is rented from a landlord or management firm. Unlike a condo, tenants do not own the apartment that they reside in. They merely pay to use it for a set period of time. Apartments are often situated in multi-unit buildings or complexes and may or may not have facilities such as swimming pools or fitness centers.

What are the main differences: Condo vs apartment?

Here are some major differences to consider.

The Structure of Ownership: Condo vs apartment

The ownership structure is one of the primary differences between condominiums and apartments. Condos, as previously stated, are individual units inside a bigger building or complex, whereas apartments are normally rented through a landlord or management firm. This implies that if you possess a condo, you can sell it or leave it to your family. In the case of an apartment, however, as a tenant, you do not have ownership rights; you are merely renting the property for a set length of time.

Here are some examples of the differences in real life.

Apartment:

1. Mike rents an apartment from a landlord or management firm. He pays a monthly rent to stay in the apartment for a set period of time, usually a year.
2. The landlord or management firm owns the apartment building or complex and is in charge of its maintenance and repairs.
3. Mike does not own the apartment unit; he is only renting it for a specific period of time.

Condo:

1. Jessica purchases a condo unit from the previous owner. She now owns the unit she lives in, as well as a portion of the building’s or complex’s shared facilities and amenities.
2. Jessica is in charge of maintaining and fixing her specific unit.
3. Jessica has the choice of selling her unit, passing it on to her children, or renting it if she wants.

Is Mike able to purchase his unit? It is possible to buy an individual unit within an apartment building, but it is more common for apartment buildings to be sold as a whole.

For example, the condo conversion. In certain situations, an apartment building may be converted into condominiums, allowing residents to purchase and own individual apartments. This typically involves the building’s owner making considerable repairs to the units and then selling them to tenants or the general public.

Responsibility for maintenance and repairs

Another major difference between condominiums and apartments is who is responsible for maintenance and repair. As a condo owner, you are responsible for the upkeep and maintenance of your own unit. This might involve jobs like upgrading appliances, painting or repairing leaks. In most cases, the landlord or management firm is in charge of apartment maintenance and repairs. Minor repairs or maintenance jobs, such as replacing light bulbs or unclogging drains, may fall under your responsibility.

Facilities

Condos frequently have facilities such as swimming pools, fitness centers, and playgrounds that are available to all residents. These features may be a significant selling factor for condo living, particularly for people who pursue an active social life. Depending on the building, apartments may or may not have these facilities. Some apartment complexes may feature a pool or a fitness facility, while others may not.

Rules and Regulations

Condominiums are managed by a homeowners’ association (HOA). Homeowners’ association (HOA)often has rules and regulations in place for the use of common areas and for the appearance of individual units. These rules may include things such as pet policies, noise restrictions, and guidelines for decorating your unit. These rules are put in place to ensure that all residents are able to enjoy a safe and pleasant living environment.

Apartments, on the other hand, may not have as many rules and regulations. However, you may still be subject to certain policies and guidelines set forth by the landlord or management company. The owner or management company is responsible for establishing the complex’s rules and regulations, which may be specified in the lease agreement that tenants sign.

Condo vs apartment: Pros and Cons for renters 

When selecting between renting a condo and an apartment, each has advantages and disadvantages. Here are some of the primary benefits and drawbacks of each:

Condos

Pros:

• Renting a condo may provide access to facilities such as pools, exercise centers, and landscaped grounds that apartment buildings may not provide.
• Condos may provide more privacy than apartments because there are fewer residents in the building, allowing you to avoid sharing amenities with a large number of people.
• Condos may be larger and have more features and finishes than apartments.

Cons:

• Renting a condo may be more expensive than renting an apartment of comparable size because renters pay a higher rent in order to cover the condo fee
• Condominiums may have stricter rules and regulations than apartments since the homeowner’s association (HOA) is in charge of implementing the community’s bylaws, covenants, conditions, and restrictions (CC&Rs).
• For maintenance, you have to contact the owner, who may respond more slowly than the apartment leasing office.

Apartments

Pros:

• Renting an apartment may be less expensive than renting a condo
• Apartments can provide more flexibility and have fewer restrictions, such as a pet policy and a noise restriction.
• Some apartments include the cost of electricity, heat, and water in the rent, making them more suited for people on a tight budget.

Cons:

• Apartments may offer less privacy and space than condominiums since they are often smaller and share walls with other units.
• Apartments may not be as secure as condominiums due to a higher turnover of residents and less control over who lives in the complex.

Condo vs apartment: Pros and Cons for Investors  

Depending on a variety of criteria such as location, demand, and market situation, both condominiums and apartments can be successful investments.

Condos and apartments, like houses, may rise in value over time. This implies you may potentially earn from the sale of your condo or apartment in the future.

However, there are advantages and disadvantages to condo and apartment investment.

Condos

Pros:

• Because you don’t have to own the entire building, condos are often seen as simple, low-maintenance investments. You have the option of purchasing simply one or more units of the building.
• Condos may be easier to finance than apartment, as lenders may view them as less risky investments than the apartment.
• Condos may provide more flexibility for investors because they may be rented out or lived in by the owner.
• Because most condominiums are long-term rentals, you won’t have to worry about finding new renters every year.

Cons:

• Condos may have greater operating costs than apartments because they often include homeowner’s association (HOA) fees that cover the cost of maintaining common spaces and facilities in addition to the cost of unit maintenance.
• You will be subject to various limitations in addition to paying homeowner’s association (HOA) fees. Significant modifications or improvements that add value to the property may be prohibited by HOA.

Apartments

Pros:

• Opportunities to purchase apartment buildings might be beneficial for larger investors. Sellers may be ready to lower asking prices on individual properties in exchange for a bidder who purchases many units.
• Apartments may have cheaper operating costs than condominiums since they often do not have HOA fees and have fewer administrative costs due to their scale and efficiency.
• As a landlord, you may make a considerable amount of passive revenue by collecting rent payments from more tenants. You can expect a higher cash flow from apartment investing.

Cons:

• Purchasing an apartment building requires a significant monetary investment to cover the down payment, closing charges, and so on. It will cost you more money than you think.
• Apartments may be more difficult to finance than condominiums because lenders see them as riskier investments.
• It is more difficult to sell. Apartments are not liquid in comparison to other condo units. It often takes months to find a competent buyer, agree on purchase conditions, and then close on the transaction.
• It is far more difficult to handle because the tenant turnover rate for apartments is quite high.

Condo vs apartment: Mortgage application 

To buy an apartment (multifamily real estate), which is classified as a commercial asset, you must apply for a commercial loan.

On the other hand, a residential loan, commonly known as a mortgage, is a loan used to buy a house or other residential property.

Let us examine the differences between these two sorts of loans.

Repayment terms: Unlike residential loans, which are frequently provided for lengths of up to 30 years, commercial loans are typically issued for terms of only 5 or 10 years.

Down payment: A commercial loan will also require a larger down payment—usually about 20%—than a residential mortgage. In rare cases, lenders will accept a less than 20 % down payment.

Interest rates: Because commercial loans are often considered riskier than home loans, interest rates on commercial loans are higher than on residential loans.

Credit check: When evaluating a commercial loan application, lenders may look into the creditworthiness of both the business and the individual owner. When issuing residential loans, lenders typically examine the individual borrower’s creditworthiness.

Investing in an apartment building can be a substantial financial investment. It is critical to have the financial resources to make the initial investment as well as to handle continuing expenses such as mortgage payments, property taxes, insurance, and maintenance fees.

You should have high-risk tolerance when investing in an apartment building. This investment is vulnerable to market changes and tenant turnover. It is critical to be comfortable with some amount of risk and to have a plan in place for dealing with probable risks.

Otherwise, condo investing is a good option because it is often more affordable and accessible to first-time buyers.

Conclusion

In conclusion, both condominiums and apartments offer advantages and disadvantages when it comes to living or investing. Your personal preferences, financial circumstances, and investing goals will all influence your selection. A condo may be the best option for you if you want the security and stability of ownership. If you value flexibility and run a cash-flowing business, an apartment may be a good option. Finally, before making a selection, it is critical to thoroughly weigh the advantages and disadvantages of each alternative.

If you’re curious about the differences between an HOA fee and a condo fee, check out this article.