Condos and apartments are both great choices for those seeking to avoid some of the maintenance hassles of living in a single-family home or those who want to live in the city. While living in a condo and living in an apartment is similar, condos and apartments are completely different from a financial perspective. Which is the better financial choice overall – renting an apartment or mortgaging a condo?

Condominiums Build Equity, Giving Them a Huge Financial Advantage Over Apartments

When you pay your mortgage on your condo, part of your payment goes towards reducing the principal of your mortgage. This increases the share of your condo that you own compared to your lender, which is known as equity. When your mortgage is fully paid, you are the full owner of your condo.

On the other hand, your apartment rent payments don't build any equity. No matter how long you rent, you have no financial share in your apartment unit. This is the main advantage of condominiums over apartments – as long as you live in your condominium and make payments, you're building up your assets and your net worth.

Condos Have Monthly HOA Fees, but They Help Protect Your Investment

You'll have to pay monthly homeowner's association (HOA) fees when you own a condo. These fees go into the HOA's reserve fund, which is used to cover shared maintenance expenses such as roof repair, landscaping, and exterior repainting.

While many condo owners complain about high HOA fees, they serve a necessary purpose – the value of each individual condo unit is maintained when the whole complex is well-maintained. In effect, the HOA fees serve to preserve the equity that you're building when you own a condo.

Interior Maintenance Can Take Condo Owners By Surprise

If your refrigerator or air conditioner breaks down in an apartment, the apartment complex will repair it for you. Repairs may not always be timely or completed well, but you're not financially responsible for them. This helps protect you financially – your rent is a fixed payment throughout the lease term, and you don't have unexpected maintenance expenses.

On the other hand, you're responsible for repairing or replacing appliances yourself when you own a condo. When your appliances break down, it leads to unexpected repair bills. These repair bills put you at more financial risk compared to living in an apartment.

Special Assessments Also Represent a Financial Risk for Condo Owners

The complex HOA takes special assessments to cover shared maintenance expenses when there's not enough money in the reserve fund. For example, if a pipe bursts in the complex, it's considered a shared maintenance problem and the HOA will pay to fix it. If there's not enough money to pay for repairs, the HOA will levy a special assessment on all condo owners in the complex in order to pay the plumber.

Special assessments are another source of unexpected expenses for condo owners. If you find a condo with a well-managed HOA that has a large reserve fund, special assessments will be less frequent.

When you're considering apartments versus condos from a financial perspective, condos are the better deal as long as you're financially stable – you need cash on hand to pay for unexpected maintenance expenses and special assessments. Building equity is a huge financial advantage over renting an apartment, pushing condos ahead from a financial perspective. At the end of your mortgage, you're left with an asset that you can sell, continue to live in or rent out to a tenant.

For help in finding condos for sale that will hold their value and allow you to build equity, contact a real estate agent that specializes in condo sales. Be sure to ask about condos that are known to have well-managed HOAs in order to find one that protects your investment.