Apartments vs. Condos | Renting vs. Owning

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twincitizen
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Re: Renting vs. Owning | Apartments vs. Condos

Postby twincitizen » March 1st, 2016, 2:02 pm

What's the consensus on owning a condo? I know many people would simply say "don't" and just continue renting until you're financially able to buy a house (assuming that you some day want a house, not a condo). I'm thinking like either a condo conversion in an old 4-plex or 6-plex (1910s-20s typically), or in a 70s-built condo complex (not downtown...I wish, but I don't work there, so no).

Ideally, I'd go straight from renting to buying a house, but as evidenced above, house prices are inflated through the roof right now and inventory is nil. It is not a good time to be an entry-level buyer who basically needs "move-in ready" condition. Given that, constantly rising rents, my fantastic credit rating + low interest rates, I'm still open to the idea of buying an older condo in the $100k-$150k range. I'd likely be paying less than (or =) my rent to live there, while building equity and retaining the option to rent the place out after I move on in 5 years or whatever. I would be hesitant to buy anything 1BR, so I'd likely be on the middle-higher end of that price range.

amiller92
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Re: Renting vs. Owning | Apartments vs. Condos

Postby amiller92 » March 1st, 2016, 2:52 pm

There's nothing particularly special about a condo versus a house, aside from needing to factor in the condo fees (which depending on the particular association, may not be that different from what you'd pay for insurance, trash, utilities, maintenance, and whatever anyway).

That said, and with the important caveat that I really only know about downtown condos, I'm not sure the market, and thus price, is any cooler than for houses. Last fall, we sold our condo in 72 hours for more than asking price. That's what we were going for, so not that it's necessarily indicative, but still. There was plenty of demand.

If it was me, I'd start with what I want out of housing. Living in a condo or apartment is different from a house in that someone else gets to worry about maintenance and the like. That's a plus. I'm sure you can think of other differences without me bloviating.

Personally I'd be a little wary of the type of small association you're talking about, in that I don't know what dividing maintenance responsibilities 4-6 ways has meant to the upkeep of the common structure. That's just enough people for everyone to ignore it, potentially leaving big exposure ahead. But that's a case-by-case thing and is true of larger, professionally-managed associations too.

Anyway, take that all with a grain of salt because I don't have any experience at all with greater than 1BR units in that price range. My personal experience has been that there is broad similarity in what I'd view as an acceptable condo versus a house in terms of price (I paid exactly the same for the condo we sold as I did for the house we bought), which to me says let your personal preference drive which to buy. Whether to buy or rent has a lot to do with how much you have for the down payment, the interest rate, the interest deduction, your interest in investing in real estate and tolerance for the associated risk and what kind of return you're getting on the rest of your investments.

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Re: Renting vs. Owning | Apartments vs. Condos

Postby QuietBlue » March 2nd, 2016, 9:02 am

twincitizen wrote:What's the consensus on owning a condo? I know many people would simply say "don't" and just continue renting until you're financially able to buy a house (assuming that you some day want a house, not a condo).
Your situation sounds rather similar to mine back in 2005 when I bought my condo. Obviously it was a different time in some respects, but there were similarities (i.e. a lack of affordable SFHs that didn't require work). Personally, I wouldn't do it again unless I was buying it specifically as a rental property. It's only "maintenance free" as far as the exterior goes -- you still are responsible for everything on the inside, though specifics vary from place to place. Plus, it requires the association or management company to be proactive and -- I had water coming in my unit during heavy rains, and it took forever to get it fixed because the management insisted it was a window issue rather than the siding issue it turned out to be, which I suspected it was from the beginning (and would have had looked at, had I been the one calling the shots). And I won't even get into how much the value tanked when the housing market crashed; it's better now, but still not great.

Yeah, rent increases suck. But at least with renting you have flexibility that you don't once you own a place, and you can always buy when conditions are more favorable (such as a weaker housing market, having more money saved up, etc). Plus, as was said by the previous poster, if SFHs have high prices, so will condos.

My personal opinion is to not buy anything (condo or house) until you are 100% sure you want it and are not just doing it because it seems like something you *should* do.

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Re: Renting vs. Owning | Apartments vs. Condos

Postby amiller92 » March 2nd, 2016, 11:03 am

I've purchased (and sold) two condos. One in DC in 2005 (I think, maybe 2006), which of course turned out to be near the top of a big bubble. I sold it in 2010 when I moved back to Minneapolis at a fairly substantial loss (something like 10%). If I was interested in owning rental property, it probably would have been financially smarter to hold on to it. I was fortunate enough to be able to afford to chose to take the loss. I'm sure it's worth well more than I paid for it today (the Zillow estimate says it's now worth 16% more than I paid).

The second was a downtown condo I bought in 2010 and sold in the fall for 25% more than an I paid for it. Substantially better timing the second time around.

Anyway, I guess what I'm trying to say is that I wouldn't reason from what happened to prices between, say, 2005 and 2010. There was a big bubble that burst and took awhile to recover. You might get stuck in that situation, but you won't know that ahead of time and for the most part, housing eventually recovers. If you anticipate that you can continue to own the property until it recovers, you'll be fine.

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Nathan
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Re: Renting vs. Owning | Apartments vs. Condos

Postby Nathan » March 2nd, 2016, 11:06 am

I bought a condo as a kind of 5 year investment mid 2013, it was cheap and the HOA is only 120. IF you can find something with a cheap to reasonable association free, it's like renting, but cheaper... I couldn't afford to live in the wedge (especially in a 1br) if I didn't own. I'll probably outgrow it within that 5 year period but I'm (knock on wood) making a fair profit!

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Re: Renting vs. Owning | Apartments vs. Condos

Postby QuietBlue » March 2nd, 2016, 11:49 am

amiller92 wrote:Anyway, I guess what I'm trying to say is that I wouldn't reason from what happened to prices between, say, 2005 and 2010. There was a big bubble that burst and took awhile to recover. You might get stuck in that situation, but you won't know that ahead of time and for the most part, housing eventually recovers. If you anticipate that you can continue to own the property until it recovers, you'll be fine.
Right; like I said, when I bought, it was a different time and things are different now.

That being said, in your case, I'd say you also had the benefit of buying the first condo in a city that was pretty insulated from the larger housing market and economy in general (mine here went down about 40-50% during the time yours went down 10%, and that wasn't unusual at all), and buying the second near the bottom of the market. Our housing market is not as bulletproof as D.C.'s (though it's better than many other places, to be sure) and we're not at the low point of the market anymore.

As for housing recovering eventually? Well, yeah, on a long enough timeline, it will. But my condo is still down about 25% from the purchase price eleven years ago, and that's not including what I'd need to spend to get it in salable condition. Holding on to a place for five years is one thing, but 10-15 years or longer is another. Timing and location both make a big difference, of course. I'm not saying nobody should ever buy property, just that they need to be aware of what can happen and not to go into it with a casino or stock market mentality.

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Re: Renting vs. Owning | Apartments vs. Condos

Postby amiller92 » March 2nd, 2016, 12:11 pm

It may be that downtown or "luxury" has recovered faster, because I'm surprised to hear you're still down from 2005.

As for DC, it might have been a little past the market bottom too.

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Re: Renting vs. Owning | Apartments vs. Condos

Postby cnelson » March 2nd, 2016, 1:53 pm

I bought in downtown in 2006 and sold in 2014 for about $6k more than what I paid in 2006. (so a decent profit given 8 years of equity) If I waited another year I probably could've raised the asking price 7-10%. Most everything downtown and the newer (2004+) buildings in Northeast and Calhoun/Uptown seem to be selling very quickly with prices continuing to rise for now. Things are a bit trickier with older buildings. I think a big chunk of the buyers right now are primarily interested in the post 2004 construction. That might mean it takes longer to sell an older condo and the return may not be very big, but I think the prices are also a bit more stable for the older stuff.

amiller92 wrote: Personally I'd be a little wary of the type of small association you're talking about, in that I don't know what dividing maintenance responsibilities 4-6 ways has meant to the upkeep of the common structure. That's just enough people for everyone to ignore it, potentially leaving big exposure ahead. But that's a case-by-case thing and is true of larger, professionally-managed associations too.
This is what jumped out at me too. There were a couple smaller buildings that I was interested in until we started to go through the HOA documents and found out about maintenance issues, unrealistic reserve studies, etc, It can happen anywhere but the small associations that don't use a property management company are more prone to run into problems and it can be harder to dig out of it if you're splitting the cost of multiple major "surprise" rehab projects in one year 6 ways instead of 60 ways.

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Re: Renting vs. Owning | Apartments vs. Condos

Postby mog » March 2nd, 2016, 2:00 pm

twincitizen wrote:What's the consensus on owning a condo? I know many people would simply say "don't" and just continue renting until you're financially able to buy a house (assuming that you some day want a house, not a condo). I'm thinking like either a condo conversion in an old 4-plex or 6-plex (1910s-20s typically), or in a 70s-built condo complex (not downtown...I wish, but I don't work there, so no).

Ideally, I'd go straight from renting to buying a house, but as evidenced above, house prices are inflated through the roof right now and inventory is nil. It is not a good time to be an entry-level buyer who basically needs "move-in ready" condition. Given that, constantly rising rents, my fantastic credit rating + low interest rates, I'm still open to the idea of buying an older condo in the $100k-$150k range. I'd likely be paying less than (or =) my rent to live there, while building equity and retaining the option to rent the place out after I move on in 5 years or whatever. I would be hesitant to buy anything 1BR, so I'd likely be on the middle-higher end of that price range.
These are the exact reasons why we decided to buy our condo. We are paying less than we would if we were renting a similar unit. Our building is a 1920s brick 4-plex in south Minneapolis, with a pretty small association fee. Who knows if we will end up making money when we sell, but as of right now we are very happy with our decision.

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Re: Renting vs. Owning | Apartments vs. Condos

Postby xandrex » March 2nd, 2016, 2:03 pm

I know I've certainly been tempted with the same forces that twincitizen brings up. There seem to be quite a few nicely renovated condos in the $120-160K range that make them competitive with my current rental situation (but often with an extra bedroom, in-unit washer/dryer, and updated kitchen/bathroom/etc). It seems like a slam dunk, except that I'm a little nervous about many of them having only 4-10 units...seems like an awful lot of risk falls on you if there's suddenly a problem with the roof.

As for property values...there's definitely a lot of condos in the Uptown neighborhood that are nice but still selling for 10-20 percent below their peak sale price (at least according to what's on Zillow).

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Re: Renting vs. Owning | Apartments vs. Condos

Postby mplsjaromir » March 2nd, 2016, 2:15 pm

Do not forget about property taxes. The city right is trying to claim that my home's Estimated Market Value has increased over 55% in the last three years. Another hassle of owning.

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Re: Renting vs. Owning | Apartments vs. Condos

Postby mattaudio » March 2nd, 2016, 2:20 pm

Increased estimated market value does not necessarily increase your tax bill. If the average EMV went up 55%, your tax bill would stay the same in nominal dollars and decrease in real dollars.

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Re: Renting vs. Owning | Apartments vs. Condos

Postby mplsjaromir » March 2nd, 2016, 2:26 pm

Unfortunately that has not been the case.

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Re: Renting vs. Owning | Apartments vs. Condos

Postby mattaudio » March 2nd, 2016, 2:47 pm

Well then congrats on having a house that's wort 55% more than it was a few years ago, and having a house value that is rising faster than the average property value. But even though you're paying more in property taxes, the taxing authorities aren't necessarily collecting more revenue overall. As far as the Mpls taxes, the average tax incidence has gone down for two years in a row despite slight levy increases.

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Re: Renting vs. Owning | Apartments vs. Condos

Postby amiller92 » March 2nd, 2016, 3:15 pm

Never personally seen a property tax valuation that was terrible close to actual market value. We paid something like 20% more than the previous property tax valuation for our house, then built a new and bigger garage. Got an updated value that's just below what we paid.

Kind of annoyed by the big jump, but how can I complain when it's less than I paid and there was a fairly big improvement added?

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Re: Renting vs. Owning | Apartments vs. Condos

Postby twincitizen » March 2nd, 2016, 4:35 pm

This looks pretty nice: http://www.edinarealty.com/homes-for-sa ... -172138830
Probably $10-20k higher than what I'd pay for a condo in that specific location, but the value is probably fairly stable. (I say higher than what I'd pay because you can often find similar condos west of Lyndale in that range.)

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Re: Renting vs. Owning | Apartments vs. Condos

Postby mplsjaromir » March 2nd, 2016, 4:54 pm

I'm disputing the valuation. The valuation does not approach the reality of the local property market. Not too difficult to dispute, the assessor could not be friendlier, but it takes up time.

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Re: Renting vs. Owning | Apartments vs. Condos

Postby twincitizen » April 18th, 2016, 3:51 pm


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Nick
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Re: Renting vs. Owning | Apartments vs. Condos

Postby Nick » April 18th, 2016, 3:59 pm

Rumor: someone here is selling a duplex!!!!

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Re: Renting vs. Owning | Apartments vs. Condos

Postby MNdible » April 18th, 2016, 4:28 pm

Nick, that's just the sort of irresponsible, baseless rumor-mongering that brings disrespect to this forum.


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