Condos vs Homes : How To Make The Right Decision?

Whether you have a comprehensive life plan or just a rough sense of direction, you surely have some idea where buying a home fits in the bigger picture of your expectations and hopes. For a single professional working long hours to lay the foundation for her career, a condominium represents a practical, prudent choice—low maintenance, just the right space, and considerable tax advantage, plus steady gains in value and equity.

The condo versus house decision correlates and becomes more complicated with age: Professionals in their twenties and early thirties wisely can use condominiums as the cornerstones of their wealth, the “buy and hold” assets in their portfolios, and they ought to plan on keeping their condos as income properties even after they buy single-family homes. Similarly, newlyweds with only vague plans for children can use investment in a condominium as means for saving the down-payment on a larger home. By the time they are ready for children, the newlyweds easily ought to qualify for a mortgage on an extremely family-friendly home. Similar reasoning applies at the other end of the age continuum. For “empty nest” investors, buyers in their fifties and sixties whose children have left home, a condominium represents the wise financial and emotional choice, an effective tool for “downsizing.”

For families with young children, however, the choice between a large condominium and a small home poses a serious dilemma. Are growing families willing to trade space and privacy for affordability? Will they get more value-per-dollar from a house?

In order to make the practical, prudent, and responsible “grown-up” decision, young families must weigh four significant variables.

• Life stage and income potential— A condo’s appreciation typically runs parallel with young parents’ increased earnings, and acquisition of a single-family home represents the next logical step. Assessed by age and career standing, the “tipping point” comes between ages thirty and thirty-five, when financial planners suggest that a family’s net worth ought to be approximately twice the sum of their ages. In other words, if husband and wife are 35, then they ought to have a net worth of at least $140,000, which satisfies the essential qualifying criterion for a mortgage. Considered in terms of dollars, the tipping point comes somewhere between $250,000 and $300,000, where the money will buy either a spacious, well-appointed condominium in an upscale development, or it will buy a nice small house in a respectable neighborhood with decent schools and lots of other young families. At current rates and terms, the monthly payment on either the condo or the house will total approximately $1600, for which the qualifying standard is $4700 per month. If the breadwinners will continue making $4700 or more each month, the house emerges as by far the better choice.

• Family size and comfort zones—Even a spacious three-bedroom condominium gets crowded if parents and two or three children fill it with their belongings and busy lives. As children grow into their “tweens” and teens, they want more privacy; nothing seems more hellish than sharing a room with your little brother or sister. Everybody in the family wants more space, and a crowded condominium does not offer much room for play, nor do the majority of condominium developments allow much yard space.
For mid-life parents and adolescent children, a home undeniably satisfies more needs, wants, and wishes. Prudence, however, still affects the decision, because parents with adolescent children are approaching the peak of their careers and their maximum income potentials. They seriously must consider whether they can afford higher mortgage payments for twenty or twenty-five years. Even as they plan and provide for this life stage, hard-working parents must anticipate life’s next phase and the home’s place in the grand scheme.

• Routine maintenance and repairs—A condominium requires very little routine maintenance, and most homeowners’ associations make provisions for residents’ plumbing and electrical emergencies, because a clogged drain or a broken pipe inevitably affects several units in the development. The condominium homeowners’ association typically takes responsibility for maintaining building exteriors and common grounds, too. A house requires yard work and responsibility for everything that breaks, clogs, wears-out, and fails. For most homeowners, maintenance and improvement contribute to the joy and pride of ownership, but not everyone has tools and skills to manage the work, and not all hard-working moms and dads can afford gardeners, plumbers, carpenters, and electricians.

• Quality of the neighborhood, schools and infrastructure—Young families carefully must assess the neighborhoods in which they would feel comfortable raising children. Although many of them make as many provisions for children and pets as they can, the majority of condominium developments are not kid-friendly environments. Just too crowded, and often too many rules and regulations. No room to play, explore, and make noise. The most kid-friendly condominiums generally cost exactly as much as “starter” homes. If the prices match, the single-family home typically wins on quality of neighborhood and infrastructure. As a rule of thumb, even if they need some renovation and upgrading, older homes in established neighborhoods are the better “buy and hold” investments, because, twenty or thirty years ago, builders took more time and used better materials.