Advantages and Disadvantages of Apartment Rental
Flexibility – Apartment Lease terms vary from apartment to apartment. Some apartments can be rented for six months while others will insist upon a 12-month minimum lease. Some apartment owners may be willing to rent on a month to month basis which is ideal for anyone who undertakes short-term contract work, or for people needing somewhere to live while they hunt for a home to purchase. Renting an apartment as opposed to owning a condo does allow for some flexibility. If you find yourself needing to relocate it is much easier to fulfill your lease obligations and move out than it is to find a buyer for your condo.
No Maintenance – Perhaps the biggest advantage of apartment rental is that there is no maintenance to be concerned with besides what was agreed to in the lease. Any repairs are usually undertaken by the maintenance manager or the owner’s contractor at the owner’s expense. Your responsibility for repairs goes no further than advising the maintenance manager as soon as something requires attention/repair. Financially this is a huge plus, but it is also ideal for busy people who simply do not have the time to deal with such issues.
Initial Expenses – The initial costs associated with renting an apartment are much less and are usually limited to a security deposit and payment of the first month’s rent. In comparison, purchasing a condo requires a sizeable amount of money to be put down as a deposit and then the closing costs will have to be also met. The cost of renters insurance is considerably less than that of homeowner’s insurance.
No Investment – When you pay to rent an apartment on a monthly basis your landlord is the only one who benefits. As you are not investing in the property and therefore have no equity, once you move out you have nothing to show for all the money you have spent.
Tax Deductions – When you rent an apartment you cannot benefit from the tax deductions that homeowners have available to them.
Rent Increases – The amount of rent you are paying per month can change at any time your landlord decides it is right to do so. While market fluctuations will be reflected in your rent should the market go up it is highly unlikely that the owner will decrease your rent when the market goes down. Rent increases can make the apartment you are in suddenly unaffordable.
Lack of Stability – Beyond the terms of your lease or rental contract you have no control over whether you will be able to continue to rent the apartment you are in. The landlord may decide that he/she no longer wants you living there and will not renew your lease, forcing you to look elsewhere for a place to live.
Lack of Freedom – Most lease and rental agreements do not allow for any modifications to the apartment whatsoever. If you don’t like the color of the walls and want to paint them a different color, your contract likely will forbid you from doing so. Some apartments have rules about other things too, such as putting holes in walls for hanging pictures and whether you can have pets or not.
Advantages and Disadvantages of a Condo Purchase
Affordability – Typically purchasing a condo is much more expensive compared to renting an apartment but buying a condo is more usually more affordable than the acquisition of a house. Because of their affordable condos are typically chosen as first homes.
Mortgage Payments – Mortgage payments stay the same month after month and are not subject to yearly increases in rents are.
Maintenance – Where apartment renters have all of their maintenance and repairs are taken care of by the property owner, when you own your condo only some of the repairs will be the responsibility of the association, leaving you responsible for the rest. Typically the homeowner’s association will be responsible for all maintenance and repairs outside of the walls of the condo, with the owner being responsible for all repairs and maintenance inside.
Tax Benefits – Homeowners can take advantage of the various tax deductions available to anyone owning a property. Also, a portion of every monthly mortgage payment goes towards the principle of the loan and therefore gives the owner an increasing amount of equity in the property. When the condo is sold, provided the proceeds of the sale are more than the mortgage, the seller will have money to use to buy another property.
HOA Fees – The Homeowner’s Association charges a monthly fee to maintain grounds, exterior plumbing, walkways, pools, tennis courts, unit roof areas, clubhouse and the like. This is an additional cost over and above the monthly mortgage payment so needs to be taken into account when calculating the actual cost of buying a condo. Occasionally if significant repair or improvement projects are required the HOA may agree to pass on an additional special assessment charge to each unit owner. Typical HOA fees are around $350 a month and if not paid for an extended length of time will likely result in the delinquent homeowner being denied access to the pool, spa, clubhouse and other privileges until the arrears are paid.
Delinquency – Due to a condo complex being owned by a large group of individual unit owners there is the potential that should someone fall behind on their HOA fees there is the potential for everyone else to be expected to make up the shortfall.
Property Taxes – Unlike renters condo owners are responsible for paying property taxes on an annual basis. Depending on the area these can amount to quite a large sum and when added to the HOA fees and mortgage payments can make condo living quite expensive.
Hard to Sell – There is more demand for single-family dwellings than there is for condos, so when it comes time to sell it may take quite some time to find a buyer. Condos do not enjoy the same rate of appreciation as houses, mainly due to the absence of land belonging solely to the unit. Real Estate markets experience fluctuations and while your condo may be worth more than you paid one day within a short time a drop in the market value could see you with less equity in it than you had before.
To Rent or Purchase
There are so many factors that go into the decision of whether to rent or purchase. Current financial circumstances are a huge influencer on this decision. Sometimes it is better to continue to rent while you save up more money to make a bigger down payment on a condo, but when the market is low and condos are more affordable purchasing may be the better option. If you are not committed to settling in a particular community and raise children renting may be the better choice. Whichever you decide on it is wise to look to the future to assess the likelihood of your circumstances changing.