If you’re an apartment dweller, you may have considered the idea of owning your apartment. But can you actually buy an apartment? Well, the answer is a bit complicated.
In this article, we’ll dig into what your options are if you’re looking to buy an apartment, what you should consider before doing so, and if purchasing an apartment is actually a good idea. So whether you’re searching for an apartment in Boston, MA, or a condo in Portland, OR, read on to learn more.
Can you buy an apartment?
The short answer is no; you can’t buy your average apartment. When most people think of buying an apartment, they are actually referring to buying a condo or a co-op, which are both individual units within a larger property. Alternatively, if you live in Hawaii, Florida, or New York, you may be able to buy what’s called a leasehold, which means you only own a unit for a set amount of time.
Let’s dig into these options for buying an apartment further.
Buying a condo
When you buy a condo, you buy an individual housing unit within a multi-unit housing complex. Each unit is individually owned, and the owners are responsible for the maintenance and upkeep of their unit. A unique and essential aspect of condo ownership is that you will pay monthly homeowner’s association (HOA) fees. These fees go towards the maintenance and upkeep of shared spaces such as landscaping, roofs, and recreational facilities (pool, gym, etc.). The average range for monthly HOA fees is between $200 and $400.
Buying into a co-op
Alternatively, if you’re looking to buy an apartment, you could consider buying into cooperative housing (also referred to as co-ops). Purchasing a co-op means buying shares in a nonprofit corporation that allows you to live in the unit. Like a condo, if you buy into a co-op, you are responsible for the co-op’s mutual financial obligations. These fees typically cover expenses such as building maintenance and upkeep and renovations or improvements to common areas.
Buying a leasehold
Another option for those wanting to buy an apartment is a leasehold, which is almost like if buying a house and renting had a baby. These leases are uncommon for residential type housing but exist in various markets, including Hawaii, Florida, and New York.
A leasehold can last anywhere from 40-120 years, and the freeholder, also known as the landlord, will take over ownership after the lease is up. This will give you the right to live in the apartment unit but does not include the land the building is on. With a leasehold, instead of paying a mortgage each month, you’ll be paying what’s called ground rent.
Having a leasehold does set you apart from those who rent. Rather than asking permission for home improvements in apartments, you have a green light to renovate.
Your real estate agent can help navigate through all of these options.
What to consider before buying an apartment
To understand whether buying or renting is right for you, you’ll need to first consider your lifestyle and what you want out of your home. Are you living alone or with roommates? There’s no one-size-fits-all on this – the correct answer is whichever option best suits your needs. Here are common questions to consider before you buy.
How much money should you have before buying an apartment?: If you’re buying a condo or co-op, you may need a down payment of at least 3-20% of your purchase price, in addition to several other fees. You also need to have enough income to support your ground rent or mortgage payments (plus property taxes). To determine how much house can you afford, using tools like an affordability calculator can help.
Determine your financial goals: Investing in real estate can build wealth, but homeownership doesn’t come risk-free. Knowing which properties are best at giving you a return on your investment (or working with someone who does) is integral to successful apartment ownership.
Consider how long will you live in the home: How long are you planning to stay put? Do you want the option to relocate for work or leisure within five years? Do you need to be able to cut and run or create stable living costs? Be sure to understand your plans, goals, and financial picture before starting the decision-making process.
Bottom line: Is it a good idea to buy an apartment?
There are many advantages and disadvantages to consider when renting and buying an apartment. It solely depends on your lifestyle and what you want out of your home. If you’re still not sure which option is right for you, talk to a mortgage lender or real estate agent who can give you professional guidance.
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