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For the most part, you'll have a similar experience living in a condominium as you would in an apartment. There are some key differences, however—especially when it comes to ownership and costs—that can help inform your decision to choose one over the other.
Here's what you need to know about the differences between a condo versus an apartment, as well as the advantages and disadvantages of each.
| Condos vs. Apartments | ||
|---|---|---|
| Condo | Apartment | |
| Ownership | Owned or rented | Rented |
| Upfront costs | If owned: Down payment, closing costs If rented: Security deposit | Security deposit, pet deposit (if applicable) |
| Ongoing costs | If owned: Mortgage payments, maintenance, repairs, COA/HOA fees, property taxes, utilities, condo insurance If rented: Rent, utilities, renters insurance, pet deposit (if applicable) | Rent, utilities, renters insurance, pet fees (if applicable) |
| Possible amenities | Clubhouse, common green space, swimming pool, gym, covered parking | Clubhouse, common green space, swimming pool, gym, laundromat, covered parking |
| Builds equity | If owned: Yes If rented: No | No |
What Is an Apartment?
An apartment is a type of rental property that's part of a multi-unit residential building or complex. Apartment buildings are typically owned by a property management company, investment company or individual landlord who leases out individual units to tenants.
In addition to living space, some apartment buildings may include certain amenities, such as common green space, a clubhouse, a swimming pool, a fitness center, a laundromat and covered parking. These amenities are managed by the apartment building's owner.
Learn more >> Financial To-Do List for Renting an Apartment
What Is a Condo?
Short for condominium, a condo is a type of private residence located inside a shared building or complex; each condo unit is individually owned. As the owner of a condo, you may choose to live in the unit or rent it out to a tenant.
As a condo owner, you'll incur many of the same costs as a homeowner. However, if you're renting a condo unit, your expenses will be similar to an apartment tenant's.
Like an apartment building, a condo complex may come with a set of amenities, such as common green space, a clubhouse, a swimming pool, a fitness center and covered parking. These amenities are managed by the condo owner's association (COA), which is similar to a homeowners association.
Differences Between Condos and Apartments
In some respects, condos and apartments are functionally the same. However, there are some clear differences between the two residential options. Here's what to know.
Ownership
While it's possible for you to buy a condo or rent one from its owner, ownership isn't an option with an apartment. Instead, you'll be renting from the apartment building's owner, who may be an individual, a property management company or an investment company.
As a condo owner, it's possible to build equity in your unit with your mortgage payments, especially as its value appreciates over time. With an apartment, however, monthly rent payments won't help you build equity.
Upfront Costs
When buying a condo, you'll typically incur many of the same costs as buying a house. That includes a down payment plus closing costs on the mortgage loan.
If you choose to rent a condo or an apartment, you may need to pay an upfront security deposit, which the landlord may use to repair damages when you move out. However, the deposit is typically refundable if you leave the unit in good condition. Landlords may also charge a pet deposit and sometimes both the first and last months' rent.
Monthly Costs
As a condo owner or landlord, you'll have a monthly mortgage payment, which includes principal, interest, taxes and insurance and a monthly COA fee.
If you rent a condo or an apartment, you'll pay monthly rent to the landlord and utilities. If you have a pet, you may also need to pay a monthly pet fee.
Maintenance and Repairs
In both cases, the cost of maintenance and repairs is the responsibility of the owner. So, if you own a condo, you'll incur those costs even if you rent out your unit to a tenant. However, the COA may provide maintenance and repairs for the exterior of your home and complex.
If you're renting out your condo, you may choose to set a rent price higher than your monthly mortgage payment to account for potential maintenance and repair costs.
Insurance
If you own a condo, you'll typically need to buy condo insurance, which covers the interior of your unit and your personal belongings. In turn, the COA will usually maintain a master policy that covers the exterior of the building and common areas—though coverage may extend to the interior of your condo.
If you rent a condo or an apartment, you may be required to buy a renters insurance policy, which provides coverage for your personal property. Even if you're not required, though, it's a good idea to have that protection.
Rules
As a condo owner, you're typically subject to the rules set by an COA, which creates regulations for the entire building or complex. You may have the flexibility to customize or renovate your unit, but there may be limitations. There may also be restrictions on pet ownership.
When renting an apartment, you'll be subject to the rules set by your landlord. If you rent a condo, however, you'll be subject to COA rules and any additional rules set by the unit's owner. For example, condo and apartment owners may set restrictions on pet ownership, and you may have little or no flexibility to customize or renovate the space.
Learn more >> Is It Better to Own a Home or Rent?
Pros and Cons of Condos
There are both advantages and disadvantages to a condo, especially if you're the owner. Here's what to keep in mind.
Pros
- More freedom: As a condo owner, you'll have more flexibility to customize your space to fit your lifestyle and preferences. While you'll be subject to certain rules set by the COA, you'll have a voice in how those rules are set.
- Ownership: Buying a condo can be a good option if you're not financially prepared for a house, and you can use the equity you build in your unit to put toward a home purchase at a later date—or any other financial goal you may have.
- Limited maintenance: Unlike a homeowner, a condo owner only has to worry about maintenance, repairs and insurance coverage for the interior of their unit. The COA takes care of the exterior.
Cons
- Significant costs: While it's generally cheaper to buy a condo than a home, you'll still need to come up with the cash for a down payment and closing costs on your mortgage loan. Also, even if you rent out your unit to a tenant, you'll still be financially responsible for maintenance and repairs. Finally, while you may get access to certain amenities through a COA, the monthly fees can often be hundreds of dollars.
- Can be difficult to offload: Among homebuyers, condos tend to be less desirable than single-family homes. As a result, it may take longer to find a buyer if you want to sell your unit and move out.
- Limited space and privacy: Condos are typically smaller than single-family homes, and you'll typically share walls with multiple neighbors.
Pros and Cons of Apartments
If you're thinking about renting an apartment—or a condo, for that matter—there are some benefits and drawbacks to consider before you proceed.
Pros
- Minimal costs: While you may have significant upfront costs—a security deposit and sometimes multiple months' rent—they typically pale in comparison to the upfront costs of buying a condo. Additionally, you won't have to worry about the cost of ongoing maintenance and repairs.
- More flexibility to relocate: You may need to wait until your rental agreement expires to move out, but you don't have to find another tenant before you can move out. Just keep in mind that if you move in the middle of your lease, your landlord may assess an early lease termination fee, which can cost between two and four months' rent.
- Location: Apartments are more likely to be located in city centers and other areas with easy access to shopping and dining. In contrast, condos tend to be located in suburban areas.
Cons
- No return on investment: You can't build equity with an apartment or condo lease, so you're not getting a monetary return on your rental payment.
- More rules and restrictions: You won't have much flexibility to customize the space to your lifestyle and preferences, and you may be subject to additional restrictions when it comes to pets. What's more, you won't have much of a say in the rules you need to abide by.
- Limited space and privacy: As with a condo, apartments tend to be relatively small and have shared walls with multiple neighbors.
Co-Op vs. Condo
Co-ops and condos may seem similar, but residents' ownership status and rights are very different. With a co-op, you buy shares of the company that owns the building and get a lease to live in a specific unit of the building. The payments you make every month don't build equity. Instead, as a shareholder, you get to vote to elect a board of directors to manage the building.
That's compared to a condo that gives you ownership of your home and the ability to build equity. Generally, a condo provides more flexibility and rights than a co-op. For example, it's easier to sublet a condo than a co-op.
The Bottom Line
While condo and apartment living can be similar in many ways, there may be significant differences financially. Understanding those differences can help you determine which one is best for you.
If you're thinking about buying a condo, it's important to make sure your credit is ready for the purchase. Start by registering with Experian to get free access to your Experian credit report and FICO® Score☉ . With these resources, you can get a sense of your creditworthiness and determine which steps you can take to improve your credit.