Lifestyle Popular

The Great Debate: Condo vs House

November 7, 2013
Great Debate 2

First time home buyers are plagued with a whirlwind of decisions when looking for the perfect place to settle down. From locations to schools and public transportation, there’s one major consideration that will determine your type of lifestyle for the years to come. After coming to terms with the loads of money you’ll be borrowing, you’ll have to decide on whether you want to live in a condo vs house.

We have friends who live downtown and have quick access to all the conveniences that the city has to offer. Other friends live in 2500 sqft houses with pools and finished basements. Are there ingredients that make one better than the other? Is there a recipe that tips the scale in favour one over the other? Oh the suspense! Who takes it?

Condo vs House Debate!

Condo-vs-House

Affordability

A quick search of MLS in our area shows that a 2 bedroom/2 bath condo starts at around $360k. Assuming a 20% down payment, a fixed 3.5% interest rate over an amortization period of 25 years, mortgage payments would amount to $1,438/month. The total paid for the condo will amount to $431,370, which includes $143,370 of interest, over the life of the mortgage.

In the same neighbourhood, the cost of a 1500 sqft townhouse start at $650k. Using the same mortgage variables as above, monthly payments amount to $2,596. Over 25 years, the total paid would be $778,862- including $258,862 of interest.

Verdict: Condo’s can be considered as a starter home, the stepping stone to building equity before jumping into “real” home ownership. House ownership, at a minimium, comes at double the cost. With the current prices of real estate in our area, owning a house remain a pipe dream for most of those starting out.

Advantage: Condo

Monthly Expenses

Condo owners pay a fixed monthly maintenance fee based on the size of their units to cover the building’s operations. A portion of the fee goes towards utilities while the rest is reserved for future repairs and amenities, like party rooms, pools, gyms, and guest suites. Some fancy condos even offer tennis courts, bowling alleys and movie theaters. There a few factors that affect the condo fee, but the more amenities at the condo, the higher the fees.

The utilities associated with a house are generally lower than condo maintenance fees. House owners pay for electricity, gas and water separately based on unit rates; they can directly affect and lower the cost by controlling energy consumption.

Verdict: Condo living comes at a premium. Amenities are nice, but often go unused. Utilities paid by house owners are less than maintenance fees and efficient energy usage can result in lower bills.

Advantage: House

Space

Our 2 bedroom condo was the perfect size for the two of us. Our second bedroom was used as a office and we had the right amount of space. When the little bugger made his way into our lives, we had to move all our things out of the spare bedroom and make way for his belongings; our office is now the dining room table. The space still fits, but we’re on track to outgrow it.

Houses have rooms for multiple kids, offices, and guest rooms. Garages have space for second cars and bikes. Summer afternoons can be spent enjoying a bbq in the backyard by the pool. Kids can shoot hoops on the driveway.

Verdict: An argument can be made for those looking to downsize that less space is more desirable, but as far as I’m concerned, houses have more space and I want it.

Advantage: House

Property Maintenance

Condo owners are on the hook for repairs inside their units. For the most part, that translates to changing the occasional light bulb and maybe calling someone if an appliance is on the fritz. There isn’t much else to it. Major repairs, landscaping and snow shoveling are taken care by the maintenance fees.

Homeowners not only have to take care of maintenance inside the house, but also the things on the outside. Cleaning the rain gutters, yard work and lawn care are time consuming. Homeowners are also on the hook for any unexpected expenses, from frozen pipes to roof repairs.

Verdict: If you aren’t particularly handy and don’t care to be, condo living is for you. However, condo owners may have to pony up cash for major repairs via a special assessment in poorly managed condo corporations. Home maintenance is more time consuming and can get expensive pretty quickly. This one really comes to to personal preference. We’ll call a Tie.

Convenience

Condo dwellers have to live with elevators. My coworker had to hobble up 24 flights of stairs with a sprained ankle during a power outage. Bring groceries home sometimes requires multiple trips up and down. Home owners can pull right into their driveway and unload everything quickly. If you forget something in the car, it doesn’t take 10 minutes to go get it. Leaving a house for work in the morning probably takes 30 seconds. The unfortunate condo dweller with a parking spot in P4 spends much more time circling around to get out of the garage. Condo owners require board approval prior to any major renovation. Homeowners have the freedom to make whatever changes they want whenever they want.

Verdict: The only thing I can think of that’s convenient about living in a condo is that I don’t have to scrape snow off my car since it’s parked in an underground garage. Then again, a home with the a garage would net the same result. I guess condo owners don’t have to shovel the driveway?

Advantage: House

Score

The Great Debate Scorecard: Condo vs House

Our pick

After carefully considering the different factors, we decided instead to side with the underdog and here’s why:

Real estate in Toronto is ridiculous. “Starter” homes in the downtown core are over $1 million; the “affordable” options are still subject to bidding wards and in dire need of repair. For newlyweds, a couple years out of school, the decision was limited to two options: buy a condo or rent. A 600 sqft one bedroom apartment rental in our current area generally runs for $1600/month. We made the decision to buy after taking a good look at our downpayment amount and comparing mortgage payments to the cost to rent; mortgage payments (accelerated biweekly) came out to be less.

We made an offer on a condo of 850 sqft after seeing about two dozen properties. Emily has always contended that the space is enough and as much as I would like more space, I have not been able to prove otherwise. We could have “afforded” (read: borrowed) more- much more, but we didn’t want to be bogged down by a giant mortgage. The smaller mortgage has allowed us to reduce the repayment schedule from 25 years to a maximum of 15 while enjoying a lifestyle that allows for luxuries and travel.

We do pay steep condo fees. Our low rise building of 14 floors enjoys amenities such as a party room, pool, gym and sauna. We’ve made use of all of them and continue to do so frequently. A quick dip in the hot tub after a soccer game does wonders to loosen up the muscles.

Condo living was the option that best suited our needs. We live within walking distance of five different grocery stores, restaurants open 24 hours a day and have access to the subway system that’s only a short ride to the downtown core. Despite my first world gripes, it certainly has grown on me. Dare I say that I’m enjoying the condo lifestyle- if only just a little.

I’d like to think we’ll be in a house sooner rather than later, especially if our family grows. Of the many things to consider, affordability has the largest weight. Though I’d much prefer a place with a backyard, a studio for her crafts and a basement for a man cave, the reality is that it is better to build equity in a starter home before moving to a bigger one. Now if only that bubble everyone seems to be talking about would just pop…

You Might Also Like

12 Comments

  • Reply dojo November 9, 2013 at 10:58 AM

    We’re not in the position to think about it, but, if it was the case, we’d want a house. We’d like our kid to have enough space to play and not cram all our lives in few rooms.

    • Daniel
      Reply Daniel November 9, 2013 at 4:08 PM

      Yeah those are my sentiments exactly. If it wasn’t for the prices of houses in the area, I’d be out looking for a bigger place in a flash. We’ll get there- I can’t wait to be kicking a ball in the backyard with the little guy someday.

  • Reply save. spend. splurge. November 9, 2013 at 9:26 PM

    Curious — how much do you pay in condo fees?

    I’m looking to basically buy a condo (but in Montreal) in 2014 / 2015 when housing prices are as soft as a raw egg and I am trying to figure out a good benchmark, considering Toronto is overpriced compared to Montreal.

    I’d like a house in theory, but I am not very handy, I hate fixing things, and I am more of an urban dweller…

    • Daniel
      Reply Daniel November 11, 2013 at 11:13 AM

      I’ve seen condo fees in the area range from $400-$700 depending on age, number of amenities, size of the building and how well it’s being run.

      As for me; I’d like to be more handy but I don’t have the space to build anything!

  • Reply Breat November 11, 2013 at 12:16 AM

    Great debate and an interesting decision. I really like that you’ve figured out that you can pay off your mortgage in 10 years vs. 25. Great job!

    • Daniel
      Reply Daniel November 11, 2013 at 10:41 AM

      Thanks Brent! Now we just have to decide on how much longer we can hold out with two bedrooms before we increase our mortgage debt again.

  • Reply Well Heeled Blog November 13, 2013 at 11:31 PM

    I tend to prefer houses, because they offer more privacy and separation (lower noise from neighbors). I also really like living in a city or at least a town with some amenities, so I’d like a house in a good location. I also want a house with some interesting architectural details, a good layout and some type of outdoor space/deck. Yup, I better start saving…

    • Daniel
      Reply Daniel November 14, 2013 at 10:29 AM

      Ah that is the dream. All bets are off if I find it first. No promises!

  • Reply Tania November 19, 2013 at 4:50 PM

    Having done both, I prefer a condo but I don’t have any little ones so that is a huge factor for me that’s different in your life. Here’s why:

    Time – I bought a condo with my ex husband when we were in our early 20s. It took me exactly 2 hours to clean the whole place top to bottom (plus do laundry) each week. In a house, I felt like I’m never done. I also got to enjoy the outdoor life (my condo had extensive pool, Jacuzzi and bbq areas) without having to spend any time maintaining it. I worked long hours (60 hours a week) so living in a condo enabled me to relax either alone or with friends in the common areas in my limited time off.

    Maintenance/Utility/Tax Costs – You covered this and assumed a house was less. In my case, it was the opposite. We lived in an older condo community that had quite a bit of units so our monthly maintenance wasn’t too bad (~$300/month which only fluctuated $60 or so over the course of 8 years). In that maintenance fee, all the common area was included but other utilities were also included like cable. Utilities that weren’t included were much lower in our condo than when we moved to a two story, three bedroom house later because, quite simply, the space was smaller in our condo. One of the benefits of small space living is you pay for less electricity and water. In a house, my hubby may also be sitting in the “office” on the computer while I’m downstairs in the living room whereas in a condo we’d be in the same room, also using less utilities, light bulbs, etc. Houses also continuously need repairs even if it’s not an old house (roof, fence, yard maintenance). In our particular house, we also needed air conditioning which had it’s own maintenance and electricity costs. In our condo, we had a smaller less complicated AC system with a smaller footprint and it was in a cooler area. The bigger value on your property, the larger your property taxes will also be (I’m in the US). So, I think the decision of which is less expensive, house or condo, will just depend on many things including locale, size and whether you have a condo that manages costs well.

    100% agree about the elevator! Grocery shopping is no fun at all when you are a condo dweller, really a pain in the butt.

    Now? I live in an attached studio next to my parents house. I love my little space but do feel like I need to clean more (more rural area with a huge lot, dirt blowing everywhere). If my parents weren’t there and retired, I’d probably have to spend my whole weekend on yard work but I don’t because they take care of that while I’m at work. If and when I was ever alone, I’d probably move back to apartment/condo living because of that. We also have PV panels so our electricity cost was quite low but the initial investment on that was about $15K USD.

    • Daniel
      Reply Daniel November 19, 2013 at 8:21 PM

      A condo with maintenance, utilities and taxes cheaper than a house? That does sound very appealing. I can see how more space would result in wasted energy and higher costs. How much do the PV panels offset the cost of electricity? That’s something I would consider if we moved into a house.

  • Reply P May 17, 2014 at 4:10 PM

    Great post, Daniel!

  • Leave a Reply