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So much real estate information focuses on the single-family home, but that’s not the only option for many buyers.
Not all apartments are created—or their buildings governed—equally, however.
This is what you need to know about condominiums, co-operative housing and duplexes.
Condos
Just like a single-family home, a condo owner runs his or her domain. A condo owner has a deed for the apartment, pays real estate taxes for the unit, and can rent out their unit if they wish.
Maintenance is a different story. Condo owners pay fees to keep up the grounds and the building (or buildings, for a larger complex). On one hand, you don’t have to mow the lawn every week. On the other, you help pay for someone who does. Fees can vary greatly depending on the building, the lands, and how well those in charge of the finances run the place.
A condo can be a good option for retirees or a disabled person who can’t manage a whole house. The relatively quick approval process for buying some condos makes it good option for young home buyers. If you’re interested in lots of personal space surrounding your home … well, you’ll share walls with neighbors.
In order to determine the market value of the condo, check the sales prices of condos of similar size, age, location—and those that have similar maintenance fees.
Also engage in due diligence when it comes to the finances. You don’t want to move in only to find the building needs multimillion-dollar fixes—and now you have to help pay for that.
Co-ops
A co-op is a non-profit company that owns and operates a residential complex. Buyers lease one of the building’s units by buying shares of stock in the building’s corporation.
Buyers have to go through a complex approval process, don’t own their apartment and don’t have ultimate control over to whom they can rent, sublet, or sell their property. If renting, you may have to present your potential tenants to the board for approval.
Mortgage or tax bills aren’t sent to the co-op shareholders but to the corporation. A monthly co-op fee includes the mortgage payments, taxes, maintenance and utilities. This cost is usually higher than condo fees. And they often require a larger downpayment than other options—but also often cost less overall.
There are financial advantages of co-op living—including substantial breaks on real estate taxes, transfer taxes and a recordation tax that occurs in real estate transactions. According to bankrate.com, co-op owners can deduct the maintenance fees from their taxes.
Duplexes
A duplex can refer to a residential unit attached to another, with a small yard to maintain. In some areas, like New York City, a duplex describes an apartment with two floors, in any kind of building.
(This is a prime example of doing your homework to make sure you understand differences in local real estate nomenclature.)
If you’re not ready to purchase a single-family home, a duplex or townhouse can be an accessible option. You could purchase a two-family house and rent out the second unit, subsidizing your own housing costs with a real estate investment. Depending on location, you may be able to qualify for publicly-funded home improvement costs.
If you decide to move out, you can simply rent it out. Your rented duplex will then be 100% rental property, while your expenditures on it are tax deductible.
Keep in mind, though, that your on-site living arrangements won’t offer you as much privacy as a single-family home. And you’ll have to learn how to play landlord—you’re responsible for not only your backed-up toilet but your tenant’s as well.
Other duplexes, especially in big cities, may allow for two families to each own in one small building. Splitting costs can get tricky. But you may get more space than you would in a condo, without the cost of a full house on your own.
Moving forward
Before you decide which is the best option for you, consider these basic questions:
- How important is privacy?
- Is owning your own property a priority?
- Do you need professional maintenance help?
- Do you have less-than-perfect credit which could adversely affect an easy approval process?
- Would you like the option of being able to rent, sublet, or sell the unit to whomever you choose?
Research all your options to gain a better idea about which type of housing solution is best for you.
Educate yourself as much as possible while seeking the advice of a professional real estate agent who can help you.
With knowledge, patience and determination, you’re bound to find the right home.
Updated from an earlier version by Mortgagematch.com staff.
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