Renting vs. Buying Condominiums: What to Consider
Renting vs. Buying a Condominium
There are many factors to consider when it comes to renting or buying a condo. Finances are a major aspect to factor in, but thats only one piece of the puzzle. Consider these pros and cons if you’re struggling with the decision to rent or buy.
1. Calculate the Price-to-Rent Ratio
If you want to know the price-to-rent ratio, find a condo in your area for sale and a condo for rent. Be sure that they have similar features, such as the same number of bedrooms and comparable square footage.
As an example, lets say you find a condo selling for $200,000, and down the block you find a similar condo renting for $1,000 per month (or $12,000 per year.) Dividing $200,000 by $12,000 will give you a price-to-rent ratio of 16.7. If the ratio is higher than 20, the monthly costs of condo ownership will exceed the cost of renting a similar condo.
2. Determine Your Household Budget
An important financial aspect to consider when deciding to rent or buy your next condo is your income. If the purchase prices of the condos in your area are exceeding what you make in three years, then consider renting. If you’re intent on buying, then consider looking at other neighborhoods or locations.
3. Identify Your Needs
If you purchase a condo, being able to change the layout is an available option. But if you rent, you’re basically stuck with what you get. Owning a condo gives you the freedom to make more invasive changes to the interior. You can remodel more easily and expand where you need to. Most tenants who are renting or leasing, won’t be able to make any significant changes.
4. How Long Do You Plan to Stay?
Another major aspect to contemplate is how long you plan on staying in the area. Renting a condo gives you a lot more flexibility to relocate if needed. Some things to consider are if you’re planning on starting with a new job or starting a family. Buying a condo, you may be stuck with the purchase until the 30-year load is paid off or you can find a buyer.
5. The Responsibility of Maintenance
One major upside to renting is that if anything goes wrong, like the electricity malfunctioning or toilet backing up, you can call the condo association to come fix the problem. As a condo owner, you’ll be responsible for any mishaps.