From lofts in restored historic buildings to gleaming high-rise condos with amazing views, it's no surprise that the condo lifestyle is in high demand. But is it better to buy or rent a condo to get that experience? Read on and explore the factors below to weigh what may work best for you.
Consider Rent Costs vs. Mortgage Payments
To decide whether it's better to buy or rent a condo, consider the costs of rent vs. mortgage payments. At a glance, renting might seem more affordable, as renters have fewer financial responsibilities than owners. However, the cost of rent still adds up significantly in the long run, especially because rent prices have a tendency to change, and that change is typically upward.
Mortgage payments, on the other hand, are often more stable in that the interest rate is usually fixed. That means payments remain the same throughout the loan repayment period, which in most cases is about 30 years. As a result, owners can easily work out an efficient repayment plan that they'll rely on for the life of the loan, making repayment simpler. Also, unlike rental costs, some mortgage payments are tax-deductible. Generally, mortgage borrowers are eligible for both state and federal tax breaks for cleared mortgage debts up to $750,000.
Those on the fence should consider working out the cost difference between renting and buying in the area they're interested in, taking into consideration how long they expect to live there. They might find that homeownership isn't as out of their reach as they thought.
If You Own a Condo, You Can Rent it Out
Another perk of buying vs. renting a condo is that owners can always rent their condo out if it's not their primary residence. In cities with significant tourism potential, owners can be confident of attractive profits from venturing into the world of short-term rentals, and long-term rentals can see steady passive income for many.
Let's take a look at Nashville to see how a vacation rental condo might work out. According to Nashville hospitality research and statistics, Nashville attracts over 16 million visitors annually, and the majority of those who come here stay an average of three to four days and spend roughly $180 per room per night. About 44% of those who visit are often here to see sights and attractions or attend the city's annual festivals, such as the annual Nashville Film Festival, while about 41% come to Nashville for business. What's more, about 91% of visitors report they're likely to come back. These stats indicate the incredible profitability potential of turning a Nashville condo into a vacation rental.
As a bonus, rent payments can be put toward paying down the owner's mortgage. Even if the condo is the owner's primary residence, should they move on, they can hang onto the condo as an investment property.
If You Own a Condo, You Can Build Equity
Even though renting offers the flexibility of moving whenever convenient and means renters are only responsible for their own belongings, rent payments can be compared to throwing money into a void since renters don't see returns at the end of the lease.
When one buys a condo, on the other hand, they build equity with each mortgage payment. For instance, if they spend $5,000 in mortgage payments, they automatically get the same amount in equity. By the end of the mortgage repayment, they'll have built equity they can leverage to renovate the condo, make a down payment for a second property, or make other real estate investments. They'll also have complete ownership over the condo, adding to their portfolio of assets.
If You Own a Rent a Condo, You Can Avoid Homeownership Costs
Similar to buying, renting has its perks, too, one of the most significant ones being no homeownership costs. As a renter, residents are aware of exactly how much to set aside for the condo each month or during each lease, and should there be changes, the landlord will update renters beforehand. Renters are also only responsible for their belongings, while the condo owner handles overall maintenance costs.
Renters don't have to stress about home insurance, or monthly utility costs such as sewer management costs, as these are typically handled by the landlord as well. This makes living in a condo a breeze for the renter as they only have to ensure they pay the lease or monthly rent required, while the rest, from maintenance to insurance, is taken care of by the landlord.
Owning a Condo Gives You More Control
When you own a home over renting one, you have a lot more personal freedom regarding how you can decorate it. While you may still have to abide by general rules from a Condo Owner's Association, you'll still be able to customize your home much more than renters can.
For example, many apartment complexes have rules about what can be painted and the colors that can be used, or the types of decor you can put on walls. Meanwhile, if you own your condo, rules will likely only dictate how you can decorate the exterior while giving you free rein over everything inside.
While this may seem like a little thing to some, decor can truly pull a home together and make it feel like your own, but it can be hard to find apartment-friendly decor if your renter's agreement says you aren't allowed to use nails to mount picture frames. In addition, if you own your condo, you can also do remodeling projects like updating your bathroom or replacing old carpet with new hardwood floors. If the floor of an apartment is worn out or looks dingy, you can't really do anything about it other than try cleaning it or strategically positioning your furniture to hide the parts you don't like if the apartment managers don't think it's worth replacing yet.
Rent or Buy a Condo? It's Up to You
While the decision to buy or rent a condo boils down to preferences, purchasing a condo helps owners build equity and expand their asset portfolio. Owners can also renovate and make improvements to personalize and maximize their condo space to their liking. While mortgage payments might be expensive in some instances, owners can always rent out their condo and use the passive income to cover mortgage payments, making it a profitable asset. But renting has its perks, too. For instance, renters can easily pack up and go when their lease is over. Each individual may have a different answer that's best for them.
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