Should Your First House Be a Condo?

Whether you're having trouble finding an affordable single-family home or you're simply fed up with renting, a condominium can be a way to wade into homeownership rather than diving into the deep end.

Condos tend to come with lower price tags than single-family homes. They offer significantly greater independence than renting, but you aren't on your own when it comes to maintenance and repairs. Plus, owning a condo gives you the chance to build equity you can use toward a down payment on your next home.

Those factors can make a condo a great starter home, though the condo lifestyle isn't for everyone. If you're looking to become a homeowner and are curious about buying a condo versus a house, here are some points to consider.

Pros of a condo vs. a house

More choices. Condos may be a relatively small slice of the overall U.S. housing market, but in certain areas, including densely populated, high-cost cities and vacation destinations, condos can be a significant proportion of for-sale listings. According to the National Association of Realtors, more than 5 million single-family homes changed hands last year, while condos and co-ops accounted for only 577,000 sales.

And condos are often priced lower than single-family homes, a difference that can be even more stark in costly areas. According to NAR data, in December 2020 the median price for existing, detached single-family homes was $314,300, while it was $272,200 for condos.

Less effort to maintain. With a condo, you aren't responsible for exterior maintenance like mowing, snow removal or gutter cleaning. Maintenance of some mechanical systems like HVAC, electrical and plumbing may also be coordinated by the homeowner association. (You will, of course, help pay for this maintenance with your monthly HOA fee.)

"Even if they don't have on-site maintenance, they probably have a slew of people who they work with all the time," says Jan Stern, a real estate agent with Century 21 Beggins Enterprises near St. Petersburg, Florida. That can save you the time of vetting tradespeople. Also, the regular crew will already know the buildings and units.

Fancier amenities. Depending on the development, access to amenities you might not otherwise be able to afford or want to maintain (like an on-site gym, a pool or a heated parking garage) may be included. These are also wrapped into monthly HOA fees, so Stern recommends focusing on complexes that have extras you'll actually use.

Potentially cheaper insurance. Condo insurance costs may be lower than homeowners insurance, since you're mainly insuring your possessions. It's important to check over the HOA's insurance policy to make sure your own policy takes care of any coverage gaps.

» MORE: Budgeting basics for new homeowners

Cons of a condo vs. a house

Rules and regulations. You won't have as much autonomy as you would in a house. HOA rules may limit what you can do both inside and outside your home, like whether you can have pets and when you can access common areas.

Lack of privacy. Condos generally have less privacy than a detached house, with shared walls and common areas. Not only are your neighbors close by, but if an adjoining unit is being used as a short-term rental, you might not be able to rely on having steady neighbors.

When it comes to subletting, "find out how many times per year and how many days at a time" a unit can be rented out, Stern suggests. A long-term rental may be fine — it might even be something you'll want to do one day if you move out but retain the condo as an investment property. But constant turnover from short-stay renters, or annual spikes of big partiers, can be much less desirable.

HOA fees. HOA fees will increase your monthly costs above your mortgage payment, though it's important to consider how these compare with owning a single-family home in your area. For example, if your HOA fees include utilities like water and services like trash pickup, those are bills you would have paid in a house, too.

But if you'd be paying for costly amenities you would never use or exterior upgrades that are subpar, you might be better off in a house — or at least in a different condo complex.

Resale issues. If you know your condo will be a starter home for you, it doesn't hurt to think about resale when you're buying — especially since condos can be harder to sell. If the HOA isn't well managed, buyers may have a harder time financing a condo because lenders are reluctant to get involved. A complex that consistently has a number of units for sale at once can be a red flag for buyers, and can also mean you'll be sitting on an unsold condo for longer.

To be better prepared to sell, Stern recommends buying a two-bedroom unit if you can afford it. Even if you only want one bedroom, "when it comes time to sell, a one-bedroom has a smaller market of buyers than a two-bedroom."