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Condo or house: What's best for you?

Dear Steve,
I am a single female who's tired of renting and I would like to purchase a condo. But I read online that you shouldn't buy a condo because you can never resell it for the amount you purchased it for. Also, the maintenance fees could become higher than the mortgage. Am I better off buying a single-family home?
-- Kay Condo

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Dear Kay,
There are many absolutes in real estate, but the notion that you'll never be able to sell a condo for the amount you paid for it is certainly not one of them.

Au contraire. Our friends at the National Association of Realtors say that condos have actually outpaced single-family homes in rate of appreciation since the early 1990s -- even doubling the single-family rate in some markets. Other indicators point to a record year in 2004 for U.S. condo sales.

But statistics are simply that -- raw and without context. Geography and several other factors should play a big role in your condo vs. single-family-home decision.

If you live in such property-constrained markets as New York, Chicago, Boston and Southern California, condos are the home of choice for many urban dwellers, and the good units are always in high demand. But in many other metro areas, the number of traditional homes dwarfs the number of condo units. And, when it's time to sell, you'll likely find potential buyers of traditional homes will dwarf the number looking for condos.

Lifestyle is another issue.

If having a family isn't in the offing for you and you'd like to simplify your existence while minimizing time spent on yard work and other maintenance, a condo could be for you. As you note, condo maintenance fees can be high (generally from $100 to $400 per month or more).

But those fees go toward the day-to-day upkeep of common areas such as swimming pools, tennis courts, exercise rooms, courtyards, clubhouses, storage areas, parking lots, hallways, etc. You have to decide if you'll use those amenities you're paying to support, if they're worth the money and whether you could pay the same fees or less to look after your single-family house in the burbs.

If you plan to go the condo route, do your homework thoroughly. If the condo complex needs a lot of work, the condo board (which is made up of residents such as you) may stick you with an extra assessment at some point in the year if it can't fully cover major maintenance problems.

Talk with residents, including a condo-board member, if possible. Ask about the association's budget and reserve fund and whether the majority of the complex's maintenance liabilities are funded. Find out about recent capital improvements or plans for future ones. Ask whether some or all utilities are included in the fees.

And make sure the condo covenants don't restrict your freedoms.

Get a really good idea of who lives at the complex. Like in an apartment, your solitude may only be as good as the quality of your neighbor.

Condos can also be volatile in pricing. New ones stand to gain in value more quickly but may also lose value more quickly if the surrounding community doesn't develop like owners thought. Existing ones are a little more stable. But note: There were a few years, since 1990, in which condos actually lost value nationally, but there were no years when single-family homes lost value.

Some of the fastest appreciating condo units are located in so-called New Urban areas of a city where residents have access to restaurants, nightclubs, light-rail transit and other street-level amenities.

A compromise for you may be a stand-alone "zero-lot-line home" or a townhome, which will probably have a minimal yard and a neighborhood association that handles maintenance. These have become increasingly popular among young singles and Baby Boom empty nesters.

In general, condos have become a pretty secure investment for careful buyers over the last decade. With diligent research on your part, you'll be able to answer your own "am I better off?" question in the end and feel better about your decision.

Good luck.

 
-- Posted: Nov. 13, 2004
     

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