Apartments vs. Condos | Renting vs. Owning

Introductions - Urban Issues - Miscellaneous News, Topics, Interests
mplsjaromir
Wells Fargo Center
Posts: 1138
Joined: June 1st, 2012, 8:03 am

Apartments vs. Condos | Renting vs. Owning

Postby mplsjaromir » July 2nd, 2012, 8:52 am

This post from Market Urbanism is a great article asking the, http://marketurbanism.com/2012/07/01/wh ... ven-exist/ question why do condos even exist? The TC metro will probably never go through the problems in the post, but is interesting nonetheless. I thoroughly recommend the Market Urbanism and especially Stephen Smith's posts, he has a tall building fixation like many do on this forum.

1200onthemall
Nicollet Mall
Posts: 104
Joined: June 1st, 2012, 1:23 pm
Location: Downtown Minneapolis

Re: Interesting Article

Postby 1200onthemall » August 5th, 2012, 4:58 pm

http://www.startribune.com/local/yourvo ... 00036.html

Interesting commentary, I could not agree more.

mulad
Moderator
Posts: 2753
Joined: June 4th, 2012, 6:30 pm
Location: Saint Paul
Contact:

Re: Interesting Article

Postby mulad » August 8th, 2012, 10:22 am

I have been pretty baffled by the way property ownership and rental works -- it really seems like there should be a better way. I do think that the concept of owning property has gotten a bit oversold: Many financial experts think that people should rent instead of buy because the amount of return on investment you get for buying is often low or negative. But at the same time, a partial loss on investment is better than the practically total loss that you get for renting (in terms of actual cash flows -- clearly the shelter itself has value).

So, for people who have lots of money in the first place and make other investments, renting makes more sense, but for people who don't have much money and are spending 50% of their income on housing, buying would make more sense if only they could get past the hump of an initial down payment. Hell, I've paid more in rent in the past 6 years than my apartment is worth on the property tax rolls (it isn't worth much, however -- a small fraction of a typical condo around here).

I figure there should be another arrangement where occupants have the option to buy up shares of a property over time, but aren't required to do so. But that could turn individual buildings into stock markets unto themselves, which could get pretty messy. I suppose it was just too complex to keep track of in the past, but it wouldn't be all that difficult with computerized systems today.

User avatar
FISHMANPET
IDS Center
Posts: 4241
Joined: June 6th, 2012, 2:19 pm
Location: Corcoran

Re: Interesting Article

Postby FISHMANPET » August 8th, 2012, 6:55 pm

I'd love to see some really smart people tackle the problems of ownership vs renting in terms of multi family housing and equity.

The best I've seen was something on Atlantic CIties Emily Badger posted on Atlantic Cities:
http://www.theatlanticcities.com/housin ... enter/484/

There were a few responses:
http://www.theatlanticcities.com/housin ... uying/519/
http://www.theatlanticcities.com/housin ... homes/529/

Matt Yglesis had the idea to make a standard lease be 5 years long instead of 1 year, but I see that creating a lot more problems than it solves.

dumberGuy

Re: Renting vs. Owning

Postby dumberGuy » August 9th, 2012, 9:13 pm

this isn't a real question in 2012. renting for most persons in most situations is almost always the slam-dunk best choice financially.

I've been renting for my entire adult life. Every time management provides notice of a rent increase, I walk down to the office and say: "So, you really want to make me a homeowner? Because this rent increase is going to do it."

Five times out of five, my rent has stayed the same. By my math, I save $6,000 per year renting. Over 10 years I have saved $60,000, which likely has compounded to $80,000. So if next time the landloard calls my bluff, I will have $100,000 plus dedicated toward a down payment -- if I choose that path (which I probably will not).

mattaudio
Stone Arch Bridge
Posts: 7752
Joined: June 19th, 2012, 2:04 pm
Location: NORI: NOrth of RIchfield

Re: Renting vs. Owning

Postby mattaudio » August 10th, 2012, 8:13 am

I was almost going to say the opposite... buying seems like the slam dunk. Prices are actually affordable now, interest rates are at historic lows, and rents are at historic highs (even if you can negotiate a deal for being a good and loyal tenant). Specifically our market has a price to rent ratio of 8 to 10, so it is significantly less expensive to own than to rent. Most of my peers bought homes within 2-3 years after college, and now many of us have SFH investment properties as well.

mulad
Moderator
Posts: 2753
Joined: June 4th, 2012, 6:30 pm
Location: Saint Paul
Contact:

Re: Renting vs. Owning

Postby mulad » August 10th, 2012, 8:40 am

I think there's a significant difference if you're looking at renting an apartment vs. owning a home compared to renting an apartment vs. owning a condo. I roll my eyes at the prices of most condos (especially when association fees are added in), but the stock of houses around here is so huge that you find a lot of relatively inexpensive stuff.

I've also had a lot of trouble finding apartments in good locations -- they often end up on pieces of leftover land that nobody else wanted. Across the entire state, the home-ownership rate got up to 75-80% in the bubble years. It's amazing how much of that remainder seems to get concentrated into what I call "freeway armpits", in the curve near a major highway junction where noise is constant.

But my perceptions may be tilted since I have certain requirements for my housing, such as central air...

mplsjaromir
Wells Fargo Center
Posts: 1138
Joined: June 1st, 2012, 8:03 am

Re: Nicollet Residences - (455 Nicollet Mall)

Postby mplsjaromir » August 23rd, 2012, 6:25 pm

K, great news, but this does make me more nervous about 1368 LaSalle.....I want that one more than any other project right now!
Magellan is a powerhouse developer, and I will be very surprised if they don't get financing for their project. I also think 1368 Lasalle could very easily be a future condo conversion given its very high quality design. And Magellan is no stranger to projects that are a combination of rental and home ownership. I could see 1368 be a combo building at some point in the future. The same holds true for Nicollet Residences.
Condos suck. They make redevelopment nearly impossible. They only exist because of a regressive government subsidy.

MplsTodd
Block E
Posts: 20
Joined: June 19th, 2012, 7:37 pm

Re: Nicollet Residences - (455 Nicollet Mall)

Postby MplsTodd » August 23rd, 2012, 7:45 pm

K, great news, but this does make me more nervous about 1368 LaSalle.....I want that one more than any other project right now!
Magellan is a powerhouse developer, and I will be very surprised if they don't get financing for their project. I also think 1368 Lasalle could very easily be a future condo conversion given its very high quality design. And Magellan is no stranger to projects that are a combination of rental and home ownership. I could see 1368 be a combo building at some point in the future. The same holds true for Nicollet Residences.
Condos suck. They make redevelopment nearly impossible. They only exist because of a regressive government subsidy.
I disagree that condos suck. But you have a point regarding the subsidy. Minnesota is quite unique in that our real estate taxes are very different depending on the property classification. Condos are taxed the same as single family homes, due to their status as homesteaded residential real estate. The effective tax rate is somewhere around 1.5% or so. In contrast, apartments are assessed as non-homesteaded residential and have a much higher effective tax rate: approximately 3.5% or so. Unlike commercial properties, landlords of apartments can't pass on their high taxes to tenants, except as higher rent. But it's been tough in this market to exceed the $2.10 psf rent. Therefore I think the high real estate taxes on apts in Minnesota have made more difficult to build the more expensive steel frame or concrete frame buildings, since their cost reportedly requires rents of $2.25 or higher. Taxes are a major component of expense in Minnesota, whereas other states such as Colorado, have significantly lower taxes on apts.

I'm looking forward to these high-rise apartments. They will benefit from offering excellent views and a design that is readily distiguished from the stick-frame buildings that are becoming so common.

While I think there may be benefits to giving homeowners a break on taxes, it's probably a legitimate question whether a homesteaded property should have a tax burden that's about half (or less) of what an apartment pays, with all other things being equal.

User avatar
FISHMANPET
IDS Center
Posts: 4241
Joined: June 6th, 2012, 2:19 pm
Location: Corcoran

Re: Nicollet Residences - (455 Nicollet Mall)

Postby FISHMANPET » August 23rd, 2012, 11:19 pm

?????Condos suck? If you want to build a community you don't do it through renting. Sorry, that just seems like an odd take.
It's not a completely off the wall idea to say that condos suck. They didn't even exist 50 years ago. They do make it basically impossible to redevelop them, unless you have some pretty radical property rights laws (aka owners have fewer rights than they currently do).

Renters don't have to be transients that don't impact the community, it's a pretty disrespectful view to take of renters.

E: Here's someone smarter than me pointing out problems with condos and why they exist in the first place.
http://marketurbanism.com/2012/07/01/wh ... ven-exist/

mplsjaromir
Wells Fargo Center
Posts: 1138
Joined: June 1st, 2012, 8:03 am

Re: Nicollet Residences - (455 Nicollet Mall)

Postby mplsjaromir » August 24th, 2012, 6:51 am

?????Condos suck? If you want to build a community you don't do it through renting. Sorry, that just seems like an odd take.
It's not a completely off the wall idea to say that condos suck. They didn't even exist 50 years ago. They do make it basically impossible to redevelop them, unless you have some pretty radical property rights laws (aka owners have fewer rights than they currently do).

Renters don't have to be transients that don't impact the community, it's a pretty disrespectful view to take of renters.

E: Here's someone smarter than me pointing out problems with condos and why they exist in the first place.
http://marketurbanism.com/2012/07/01/wh ... ven-exist/
I was too harsh. FISHMAPET pretty much sums up what I mean more clearly. I think Americans have been conditioned to automatically believe that, home ownership > renting, which is not true not in all cases. Owning a single family home is great, but having fractional ownership of a condo building pretty much means that building is never changing.

Minneapolis in our lifetimes will likely never be in the position of not having anywhere to redevelop land downtown, so condos are probably fine. And if people like the idea of owning condos and would not live downtown unless they owned, all the better. But John's sentiment that a condo conversion in of itself is an upgrade I think is misguided.

nasa35

Re: Nicollet Residences - (455 Nicollet Mall)

Postby nasa35 » August 24th, 2012, 7:00 am

?????Condos suck? If you want to build a community you don't do it through renting. Sorry, that just seems like an odd take.
It's not a completely off the wall idea to say that condos suck. They didn't even exist 50 years ago. They do make it basically impossible to redevelop them, unless you have some pretty radical property rights laws (aka owners have fewer rights than they currently do).

Renters don't have to be transients that don't impact the community, it's a pretty disrespectful view to take of renters.

E: Here's someone smarter than me pointing out problems with condos and why they exist in the first place.
http://marketurbanism.com/2012/07/01/wh ... ven-exist/
Disrespectful? What the hell are you talking about?

My view is condos don't suck and that renters move more often. where in the hell is there disrespect there?

min-chi-cbus
Capella Tower
Posts: 2869
Joined: June 1st, 2012, 9:19 am

Re: Nicollet Residences - (455 Nicollet Mall)

Postby min-chi-cbus » August 24th, 2012, 7:39 am

IMO condos don't make a ton of sense in moderately-priced (or especially cheap) markets, including Minneapolis. The purpose of a condo, to me, is to be able to have an equity stake in your apartment because you can't afford to purchase a home (or don't want to live THAT far away from your office). This makes sense in places like New York or San Francisco where SFH ownership is impossible within the city limits and not everybody wants to rent indefinitely. It provides an alternative investment option to folks who have few/no options. In Minneapolis, you CAN own a home for a VERY modest price....and IN the city, close to downtown if preferred. So I don't always see the point beyond a few people who don't care to take care of their own lawns, maintenance, etc. I get that part.

min-chi-cbus
Capella Tower
Posts: 2869
Joined: June 1st, 2012, 9:19 am

Re: Nicollet Residences - (455 Nicollet Mall)

Postby min-chi-cbus » August 24th, 2012, 7:45 am

3.5% or so. Unlike commercial properties, landlords of apartments can't pass on their high taxes to tenants, except as higher rent. But it's been tough in this market to exceed the $2.10 psf rent. Therefore I think the high real estate taxes on apts in Minnesota have made more difficult to build the more expensive steel frame or concrete frame buildings, since their cost reportedly requires rents of $2.25 or higher.
But 3.5% of $2.10 is $0.07/SF, or $2.03 total before taxes. In other words, the taxes alone can't be the reason for the type of materials used to build apartments, as they make up no more than $0.07/SF of the cost/SF to rent. Rents just aren't high enough. Taxes could be the culprit once rents reached north of $2.17/SF probably.

User avatar
FISHMANPET
IDS Center
Posts: 4241
Joined: June 6th, 2012, 2:19 pm
Location: Corcoran

Re: Nicollet Residences - (455 Nicollet Mall)

Postby FISHMANPET » August 24th, 2012, 7:47 am

?????Condos suck? If you want to build a community you don't do it through renting. Sorry, that just seems like an odd take.
It's not a completely off the wall idea to say that condos suck. They didn't even exist 50 years ago. They do make it basically impossible to redevelop them, unless you have some pretty radical property rights laws (aka owners have fewer rights than they currently do).

Renters don't have to be transients that don't impact the community, it's a pretty disrespectful view to take of renters.

E: Here's someone smarter than me pointing out problems with condos and why they exist in the first place.
http://marketurbanism.com/2012/07/01/wh ... ven-exist/
Disrespectful? What the hell are you talking about?

My view is condos don't suck and that renters move more often. where in the hell is there disrespect there?
You said you can't have "community" with just renters. And I'm not able to read that statement in any way other than that you're saying that renters are a bunch of hoodlums who storm into the community for a year and then storm out and never leave a lasting impact on the community. What if someone rented the same apartment for 30 years, would they have any impact on the community? Is that worse than someone who buys a condo and flips it after 3 years?

mnmike
Wells Fargo Center
Posts: 1092
Joined: June 2nd, 2012, 11:01 am

Re: Nicollet Residences - (455 Nicollet Mall)

Postby mnmike » August 24th, 2012, 8:14 am

IMO condos don't make a ton of sense in moderately-priced (or especially cheap) markets, including Minneapolis. The purpose of a condo, to me, is to be able to have an equity stake in your apartment because you can't afford to purchase a home (or don't want to live THAT far away from your office). This makes sense in places like New York or San Francisco where SFH ownership is impossible within the city limits and not everybody wants to rent indefinitely. It provides an alternative investment option to folks who have few/no options. In Minneapolis, you CAN own a home for a VERY modest price....and IN the city, close to downtown if preferred. So I don't always see the point beyond a few people who don't care to take care of their own lawns, maintenance, etc. I get that part.
What are you talking about? Condos run pretty much the same price point as houses...plus association fees.

Tyler
Foshay Tower
Posts: 976
Joined: June 1st, 2012, 10:10 am

Re: Nicollet Residences - (455 Nicollet Mall)

Postby Tyler » August 24th, 2012, 8:22 am

You said you can't have "community" with just renters. And I'm not able to read that statement in any way other than that you're saying that renters are a bunch of hoodlums who storm into the community for a year and then storm out and never leave a lasting impact on the community. What if someone rented the same apartment for 30 years, would they have any impact on the community? Is that worse than someone who buys a condo and flips it after 3 years?
LOL. Maybe re-read what nasa wrote. It's about the least inflammatory thing he's said in months and you're still biting his head off for it. Renters obviously help to build the community but it's a fact that they are more transient.

And have you lived in both a condo and an apartment? As far as the sense of community within the building it's a dramatic difference, in my experience.
Towns!

mnmike
Wells Fargo Center
Posts: 1092
Joined: June 2nd, 2012, 11:01 am

Re: Nicollet Residences - (455 Nicollet Mall)

Postby mnmike » August 24th, 2012, 8:35 am

PS. I am all for condos....but about the last post, depends on the apartment building. I have lived in the same 5 unit building near Henn and 34th for 10 years, the building has a pretty low turnover, so I usually know all the neighbors...we invite eachother to parties sometimes and so on. On the other hand, my friend who has lived in a 30 unit condo for 5 years doen't really know any of his neighbors aside from their faces he has seen at association meetings. It's hard to generalize.

Anyway, to say there is no place for condos is just silly, and the comment about condos being only for those who can't afford homes(really it should say houses, because condos are homes) is also very silly. Even in Minneapolis I can afford an apartment I like, but I can't afford a condo of the same caliber, if I could, I would buy so I would have a stake. Sure, I could but a house in North Minneapolis, but do I want to live there? Do any of the potential downtown condo buyers want to? They are just another option. Not everyone wants a yard with maintenance.

Min-chi-bus-I had your point confused for a minute there...I get what you are saying about bigger more expensive cities, but I still don't see that being a good argument for condos not making sense. My friends in Chicago could have rented or gone condo within the same neighborhood, for the same (very high)price, and they decided to buy, so they could (hopefully) gain equity.

PPS, looks like this topic needs its own thread! haha.
Last edited by mnmike on August 24th, 2012, 8:57 am, edited 7 times in total.

Tyler
Foshay Tower
Posts: 976
Joined: June 1st, 2012, 10:10 am

Re: Nicollet Residences - (455 Nicollet Mall)

Postby Tyler » August 24th, 2012, 8:49 am

I guess I'm speaking specifically for downtown here. I've lived in 4 downtown apartment buildings and one condo. Night and day difference. Quite different demographics, as well. I think there is a pretty decent subset of people who would have little interest renting downtown but would want to purchase a condo. And is has very little to do with "regressive government subsidy." These same type of people seem to be much more actively involved in the community.

But yeah, this is all just from personal observation.
Towns!

mplsjaromir
Wells Fargo Center
Posts: 1138
Joined: June 1st, 2012, 8:03 am

Re: Nicollet Residences - (455 Nicollet Mall)

Postby mplsjaromir » August 24th, 2012, 8:59 am

I guess I'm speaking specifically for downtown here. I've lived in 4 downtown apartment buildings and one condo. Night and day difference. Quite different demographics, as well. I think there is a pretty decent subset of people who would have little interest renting downtown but would want to purchase a condo. And is has very little to do with "regressive government subsidy." These same type of people seem to be much more actively involved in the community.

But yeah, this is all just from personal observation.
Mortgage Interest Deduction is a regressive tax deduction. The more expensive the home you buy the larger the tax break. I think most people take into account tax implications when making major financial decisions.


Who is online

Users browsing this forum: No registered users and 17 guests