A question that comes up a lot, especially with my first-time buyers, is whether they should buy a Condo or a Freehold? Both have pluses and minuses, so let’s weigh the options…
There is often some confusion about what a condominium is. Most people think they are all apartment-style high rises. While this is true in many cases, the term “condominium” refers to the type of ownership the space has and has nothing to do with its physical characteristics. A condo doesn’t have to be an apartment at all. There are townhouses, linked houses or just shared common spaces.
When you buy a condo, you essentially invest your money by buying shares into a company. The best part is you can live in your investment! Condos have boards that decide how the “company” will be run. They choose how costs will be allocated, maintain the property etc. Your neighbours are fellow shareholders with a vested interest in the company. When purchasing a freehold, you bought and own the building and the land it sits on. You can decide (depending on your municipality by-laws) to do whatever you wish to your home!
Both have pluses and minuses.
First, let’s discuss buying a condo. Condos are an excellent choice for many buyers as they are a great way to get into the market and build some equity. Condos can be an excellent starting point since they are usually less expensive to own and carry than a freehold. They are a perfect choice if you have a busy and active lifestyle. There are no yards to mow, sidewalks to shovel or roofs to worry about fixing. What I love about condos are the amenities! Developers have emphasized creating a lifestyle in buildings; gyms, yoga studios, and pools are just a few of the great features in buildings.
Often I hear people concerned about maintenance fees! What are they? Maintenance Fees are a predetermined amount based on your total interior square footage (balconies are not included in this, but parking spots and lockers are!) that you pay monthly. This covers everything your “corporation” has – concierge, amenities, shuttle service, etc. The more amenities you have, the more you pay. However, someone else is looking after the upkeep and management. The MFs are in the account for regular expenses, and inevitably as time goes on, the building might need to have an expensive repair. The money you contribute goes into a reserve fund to pay for it. Each corporation is different, so make sure you know as much as possible about yours before finalizing an offer! Condos also come with Rules and Regulations: these rules are to make everyone in the corporation live harmoniously together and protect the overall investment of the shareholders. Some standard rules are that all exterior windows must be the same colour (often white), or there are weight restrictions on pets. Again every corporation is different. You want to ensure you know and are comfortable with your condo rules.
Now on to Freehold! I know I probably have you all excited about condos and carefree living, but freeholds have their own advantages. There are many more detached home options; as a general rule, freehold homes have more extensive square footage and property sizes. You also have more freedom to alter your space as you wish. You are responsible for the upkeep and maintenance of the property. Having said that, you should put away at least 1% of the value of your home monthly into a reserve fund. Condos just budget that cost for you. The other advantage is land value. You can build or tear down when you own your land (of course, subject to city by-law’s approval).
Both forms of real estate are excellent. In the beginning, have your agent show you both options. Work out the costs and know your lifestyle so you can make an informed decision that you will be comfortable with!