In: Categories » » Home business » What Are the Pros and Cons of Condo Co ops versus Single Family Homes
When you buy into a shared ownership property (either condo or coop), you are actually trading off a portion of your privacy in exchange for other benefits such as guaranteed maintenance, architectural control, and amenities such as a pool, spa, rec room, tennis courts, clubhouse, and occasional parties that go along with condominium living.
Shared versus Private Ownership Pros of Owning a Single-Family House You are generally “master of your domain” Increased privacy No monthly owner fees paid to the HOA or board Strong price appreciation in good markets Cons of Owning a Single-Family House Generally more expensive on an absolute cost basis Maintenance required Little architectural control Pros of Owning a Condo/Co-op Little or no exterior maintenance or repair Amenities such as pool or clubhouse Strict architectural control Sometimes utilities and insurance are paid for by HOA Recently stronger price appreciation in good markets Often more security Cons of Owning a Condo/Co-op Little say about the exterior of your unit Noisier Generally smaller units that single-family homes In a natural disaster (earthquake, hurricane) you could lose everything Historically slower price appreciation A shared property is often the choice of those who are looking for a first or a retirement house. The shared living means others are around to help out, the financing is usually similar as for a singlefamily house, and sometimes you can get into a good location for less (although on a square footage basis, you may also be getting less). Many first-time buyers purchase a condo or co-op and then live in it a few years, building up their equities. When they sell, they have a small nest egg that they can then apply towards a house. Many retirees opt for a condo/co-op because they don’t want to mow lawns anymore and are concerned about security.
If you buy into a condo/co-op, expect to spend some time on the homeowner association (or board of directors) just for self-protection. If you don’t, you’ll find that the HOAor board is always doing something that you consider ridiculous and that you don’t like. If you’re an owner, you’ll want to be a part of decisions that affect your home and its value. On the other hand, be aware of HOAburnout. This comes after you’ve been a member of the board for a year or two and found that you can’t get done what you want to get done. Often, owners will get discouraged and will then sell their unit. If you’re at least aware of this possibility, you may be less inclined to make such a drastic move when a stalemate does occur. As an additional resource on this topic, check into Tips and Traps When Buying a Condo, Co-op, or Townhouse, McGraw-Hill, Irwin, 2000.
Nothing-down financing does it really exist? Or is it just a buzzword used by real estate gurus selling you a seat in a seminar or a tape on late-night TV? Today, it really does exist, for some buyers. And that’s a good thing, too. Most people who want to buy a home often find that the biggest roadblock is coming up with the cash down payment. (So if you’re feeling the pinch, rest assured you’re not alone!) Let’s face it; we live in a credit society. Afamily with a $100,000 annual income can easily obtain a new car loan with almost nothing down and a $500-a-month car payment. But that same family may not have $5000 in the bank in a savings account. In fact, over 70 percent of all families have little or no cash savings. (On the other hand, that other 30 percent or so have whopping big savings accounts!)
What Your Mortgage Payment Includes
Interest on your loan Return of equity (principal) Hazard insurance (if you put down less than 20 percent) Taxes (if you put down less than 20 percent) I’m reminded of that old saw about the two investors who want to buy the Empire State Building in New York. The first investor, just returned from a meeting with the sellers, tells the second, “I’ve got good news and bad. The good news is that they’ll take our $100 million offer.” “Great,” says the second investor. “What’s the bad news?” “They want $500 cash down!”
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