Condominium, house, or rental apartment. Should you buy or lease?

What is better. Buy a condominium, a house, or rent an apartment. This is the problem facing anyone who wishes to make a change in their living arrangement. It is not an easy choice to make.

First take a look at renting an apartment. The apartment is owned by a landlord who, for all intents and purposes, is in business to make a profit. He or she builds an apartment building with the expectation that he can cover all of the costs of insurance, heating, water, hydro, superintendent, and maintenance and cover the replacement cost from the rent that is charged.

Now take a look at the condominium choice. A group of owners get together under the guise of the developer. The building is constructed and everyone moves in by purchasing an apartment. They do so by getting a mortgage on their unit. To cover the expense of operating the building they use a system called maintenance fees. That is a fund that all owners contribute to based upon the square footage of their apartment. Not only does it cover all of the costs of maintaining the building and grounds but it covers the replacement costs of everything as they wear out. There is nothing allowed in the fee for profit.

Finally we get to the house. A stand alone, detached structure on its own lot of land. You get a mortgage from your broker and buy the home of your dreams. You pay for all of the repairs and maintenance as they occur.

One way or another taxes will be paid by you one way or another. So what is best.

The condominium at first looks over-priced because the maintenance fees are based upon a span of 25 or 30 years. If you did due diligence with the detached house and put aside the same amount you would put aside while owning the condominium, less the management fees, you should end up with the same costs with either one. If there is a community center or a private golf course or tennis court or any other activity facility you need to decide just how much use you will have of those benefits. Remember, the costs of building these things and replacing same are included in your fees.

You may have a fee in your maintenance total of more than $100.00 per month just for things you may never use or take part in. Then again if you own the house you could easily pay more than $100.00 for a gymnasium, golf course etc.

One way to look at what is best is this. How long do you expect to live in what you buy. If you buy when the real estate market is at a low and sold after a few years when it was at it’s high you will possibly make a very nice profit. If you want to stay in your new abode for a long term of say 25 years, that huge profit you may make could disappear when you factor in the mortgage interest you paid over that time period. Now add in the 25 years of taxes, and repairs you made, or the condominium fees you paid. You do the math.

Now look at renting, long term. You pay the rent each month. You may rent with services thrown in like hydro, heat and water. A light bulb burns out, the toilet develops a leak, the kitchen tap starts to drip, no problem, call the super. The landlord pays the taxes, fixes the roof, replaces the furnace and the many other things that go out of kilter. You pay the rent each month. The day you decide to move out you walk away nobody gives you a penny.

If you look at the three, renting an apartment demands the least money outlay per month. If you calculate the cost of the house or condo, add in the interest, add in the maintenance over twenty five years and then deduct that amount from the selling price you will arrive at the profit/loss of the purchase.

Now assume you will rent an apartment and put the difference in cost between the condo/house aside each month into an investment account for twenty five years at a compound interest of 5 per cent annually. You will be shocked at the result. This result does not rely on an up/down real estate market to produce either.