Buying Condo vs. House: Which Option Is a Better Investment? (2024)

FAQs

Buying Condo vs. House: Which Option Is a Better Investment? ›

Condos typically appreciate over time, but these gains are cut into by the expensive fees. Houses on the other hand usually appreciate more in value over time. The main reason for this is people would rather pay a higher sales price for a property that doesn't come with fees.

Less maintenance – If you own a house, all of the upkeep of the property falls on you. If you don't want to worry about maintenance as much, a condo might be a better fit. More perks – Unlike a house, many condo communities come with amenities like a pool or playground, and features like security systems.

Even though condos generally appreciate at a slower rate than single-family homes, they're still likely to increase in value over time. Some of the factors that can impact appreciation include: Location. Walkability.

Single-family homes tend to appreciate more than condos, partly because people have a hard time envisioning paying a higher sales price for a property where they have to pay condo fees. Many homebuyers would rather put that money into home improvements of their own choosing.

Higher Cashflow and Higher ROI

With apartment investing you will have higher cash flow and ROI and this will make a tremendous difference over the long term. Here is the difference between single-family rentals and apartments. If you have a single-family home and your renter moves out, you have zero income.

The Bottom Line. Condominiums can be a good investment for the right buyer in the right location when times are tough, though they can be harder to buy and sell than a detached house. Before purchasing a condo, be sure to do your due diligence and check out the HOA, CC&Rs, and any tax and insurance situations.

Is it easier to get a mortgage for a condo than a house? No. While the listing price of a condo may be lower, the requirements for securing a mortgage for one may be tougher. That's because lenders apply an additional layer of scrutiny in their underwriting, examining the association's financials as well as your own.

Condos are typically cheaper than single-family homes, but tend to appreciate in value over time similar to detached properties. Condos can be a smart investment for first-time homebuyers, vacation homeowners and rental property investors.

Historically, condos appreciate in value but typically at a more moderate rate compared to single-family homes. The COVID-19 pandemic initially decreased condo demand. But, as buyers are migrating back to urban centers, both demand and condo values are experiencing a resurgence.

Condos can be a gateway to first-time home ownership, passive income through rental investing, or a vacation home in a great location. However, condos also sell for nearly $55,000 less than single-family homes on average and can pose significantly more barriers in the form of HOA fees and restrictions.

What adds the most value to a condo? ›

Colonial Homes

These homes often feature brick or wood siding and gable roofs. Colonial homes are popular among buyers because of their historical charm and practical layouts. Their timeless appeal makes them a top choice in many real estate markets, ensuring a high resale value.

Condos tend to be cheaper in terms of property taxes, too: A smaller valuation means a smaller bill from the local government. Condos also provide a community life that single-family homes often don't provide, including shared spaces and amenities, events and more.

It's called the 2% rule. This applies to any investment, and says that an investor will risk no more than 2% of their available capital on any single investment. In real estate, this means that a property is only a good investment if it will generate at least 2% of the property's purchase price each month in cash flow.

Is owning a house a good investment? In the long run, owning a home is a good investment. When you rent, your money goes to your landlord, whereas you can see a return on your investment over time when you put your money toward a home.

The decision to put your money into real estate versus other types of investments will depend on your financial health, risk tolerance and short- and long-term goals. Real estate does tend to increase in value over time, but appreciation is not a guarantee.

That's because Fannie Mae and Freddie Mac view condos as a riskier bet and, to compensate, they charge the lender an extra fee if you're buying a condo and your loan-to-value (LTV) ratio is over 60%. Lenders pass on this fee to you by charging slightly higher interest rates.

Fewer maintenance and repair responsibilities. Access to on-site amenities, such as a sauna or swimming pool, which you otherwise might not be able to afford. Enhanced security features in some condominium units.