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Will a Condo or a House be a Better Home for You?

17 September 2012

The decision to buy a home or a condo is one that many wrestle with when they get out into the housing market. A condo in most parts is much cheaper than a single-family home; but condos have association fees that don’t come with being a homeowner. So, which is the best buy? To figure that out, you have to look at much more than just the initial price tag of a property.

Below is a chart of four different properties around Toronto, and what a homeowner could expect to pay for them.

Looking at the prices of these properties alone, you might think that the 2-bedroom condo on Yonge is the best buy. After all, it is the cheapest. But then you can see after taking in all the other costs, it’s actually the 3-bedroom house in Weston &B Lawrence that will give you the most value for your dollar. In fact, that 2-bedroom condo on Yonge is third on the list.

This shows just how important it is to take all those other little costs into consideration when making the decision to buy. But don’t think that owning a home will always be the cheapest option, either. There are costs here too, that all too often homebuyers forget about. Or just don’t know about to begin with. One of those costs is insurance.

B.C. mortgage broker Dara Fahy says,

“Typically your monthly condo maintenance fees include insurance for things like fires and flooding, whereas insuring a house for these kinds of things can be expensive on your own.”

Toronto real estate agent, Andrew LaFleur, agrees saying,

“When you’re buying a house, you’re buying a structure. So you need insurance for that whole structure, the whole building. You’ll need to think about things like sewage back up and weather related incidents. Whereas with a condo you just need to worry about your contents.”

And don’t forget about those property taxes, either. These are calculated depending on the price of the property and so, condo taxes are also generally less.

“In my experience,” says LaFleur, “the assessed value of a condo tends to be a lower percentage of the actual market value on a condo than on a house. The average Toronto property tax rate on a house is around $3,000 a year, whereas the average Toronto condo is more like $2,000 a year.”

But the biggest debate undoubtedly surrounds condo fees. These are fees that every condo owner must pay each month. They go into a large pool and, many people believe, are simply eaten up by the condo corporation and bring absolutely no benefit to the condo owner. This is simply untrue.

Those fees are being used to shovel snow in the winter, cut lawns in the summer, and keep the building in clean condition and working repair. They’re all the things that you’d be paying for if you were a homeowner. But this time, you don’t actually have to do any of the work.

“There’s a belief that maintenance fees in condos are taking money from you and not going anywhere, and that you’re better off buying a house,” says LaFleur. “But that’s one of the biggest myths in the home-buying universe.”

LaFleur also compares the monthly condo costs to home ownership maintenance costs to show just how vastly different the two can be.

“Five grand, when spent on a house, will disappear really fast on any major repair or upgrade,” he says. “If you need a new roof, that’s five grand. New windows, that’s ten grand. Simple landscaping in your backyard can easily cost ten, fifteen grand. There are all these littlel things that can go wrong in a house, and people are often amazed at how much a home can cost to upkeep.”

But, he also points out that those repairs are likely to be few and far between. And that is a difference when it comes to maintenance fees for a condo or a home. Those for a condo will effect your monthly cash flow.

It’s clear that there’s no real answer, and that homebuyers need to weigh all the options very heavily before making the decision that’s right for them. What do you think is the better buy – a house or a condo? Leave us a note in the comment section below or, find us on Facebook and join in on our conversation over there!

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