Rent vs. Buy: Making the Right Condo Decision
Have you been considering a condo investment? Are you wondering, “should I buy a condo or rent it”? These are common questions when looking for luxury condos in Phoenix, AZ. The state is a popular hot spot for retirees, young families, and snowbirds looking for a way to escape the high costs of living and cold weather. If you’re thinking about making a change, we’ll share the benefits of buying luxury condos and why it is a better financial option in the long term.
Qualifying to Buy a Condo
Before making any decisions about any condo investment, you should review your finances. Many people struggle with buying a condo vs. renting because they assume they won’t be able to afford the down payment. One of the best aspects of buying a condo is that the purchase price is typically much lower than a single-family home.
According to the National Association of REALTORS®, the average price for a condo investment is only $266,000 compared to the average price for a single-family home that starts at $300,000. For people with fewer savings available for a large down payment, the process of a condo investment includes down payment and closing cost assistance programs. Although a minimum credit score and income are required to qualify for these options, they offer a significant advantage over purchasing single-family homes that can be more expensive.
Pros and Cons of Buying a Condo
Most future homeowners assume that they are not in a position to afford luxury condos in Phoenix, AZ, so they choose to rent them. A thorough understanding of the pros and cons of buying a condo will help you make an informed decision. You may be surprised to learn that you are in a great position for a condo investment. Here are some things to consider before starting the process:
- Pros – Most condo buildings have additional amenities shared by the community like swimming pools, fitness centers, clubhouses, playgrounds, and movie theaters. This is perfect for a young family starting out with children. Some luxury condos are gated, and most have 24-hour security on-site that adds to increased safety and security. They are generally located near bustling city centers within proximity to accessible entertainment. Other benefits of buying a condo include:
- Fixed rates – Compared to rents that are constantly rising annually, a condo investment comes with a fixed mortgage rate that remains constant throughout the life of the loan. This is especially helpful for reducing housing costs since you can expect your condo payments to remain consistent regardless of home maintenance, which the Home Owners Association often covers.
- Build wealth – One of the most significant benefits of a condo investment is the chance to build wealth through equity while also helping you build credit. Luxury condos in Phoenix, AZ, rise in value every year because the market is stable and has not been impacted by the pandemic. When you are ready for a larger home for your growing family, you will likely make more money on your condo investment than what you spent. Making rent payments will only benefit your landlord.
- Tax breaks – There are significant tax advantages to a condo investment that you won’t get as a renter. For young couples starting their careers and retirees looking to reduce their yearly tax burden, luxury condos in Phoenix, AZ, continue to be a perfect solution. Since Arizona does not tax Social Security benefits and keeps property taxes low, it is a favored destination for retirees.
- Less management – New homeowners decide to buy a condo because it requires less maintenance. The smaller space provides the convenience of requiring minimal furnishing, cleaning, or repair. They are usually only half the size of a single-family home.
- Cons – Are you still wondering, “Should I buy a condo or rent”? There will always be major costs in making any home purchase, regardless of whether it’s a condo investment or a single-family home. To break even or gain a profit on the sale after buying a condo vs. renting, you will need to remain in the home for at least three years.
- Upfront costs and fees – The upfront costs of buying a condo vs. renting are significantly higher. When renting luxury condos, you will only need a deposit with the first and last month’s rent. However, when you buy a condo, you will have closing costs, down payments, and regular HOA fees to cover. These costs can come to 3% or more of the purchase price, including homeowner’s insurance, title searches, appraisal fees, and more.
- Monthly payments – Without significant savings, monthly rent payments may be less than mortgage payments on a condo investment. Since the upfront costs of renting may be the same as a monthly rent payment without waiting for a home loan to close, you can secure a rental much quicker.
- HOA fees – Depending on the housing market, home association fees can increase, especially if significant repairs are required. While leaving a rental situation may seem like relief from rising prices, your HOA fees may increase by as much as $100 or as little as $25 annually. With a condo investment, you can be at the mercy of an HOA for maintenance.
- Less flexibility – Renting a condo is easier to get in and out of. If you are considering moving within the next couple of years, you may not want to consider making a condo investment that will tie you to one place. If you experience an unexpected financial hardship, a mortgage will risk your home and credit score. Getting approval for a rental lease is less risky than waiting for loan approval. A condo investment could place you in debt while renting may not.
Should I Buy a Condo?
In the end, it’s more beneficial to make a condo investment when you are financially stable and ready to do so. You will benefit from every expense associated with the purchase of a condo while building wealth. When choosing a condo, you should be aware of these things first:
- Location – Where you choose to buy a condo can make or break your experience, market price, and lifestyle. Surveying activities within walking distance, work commute, and public transportation can make a big difference in where you choose to buy luxury condos in Phoenix, AZ.
- HOA – When you enter an HOA, expect to pay monthly dues that contribute to the regular maintenance and upkeep of luxury condos. Take time to learn the history of the HOA’s management and prior assessments. Remember that an HOA establishes strict guidelines for the community to follow pertaining to pets, overnight guests, or loud parties. A good HOA can be a significant advantage.
The Best Real Estate Agent for Luxury Condos in Phoenix AZ
Jeff Barchi is an award-winning real estate agent who consistently ranks in the top agents in the nation. Serving the Paradise Valley, Phoenix, Scottsdale, and surrounding areas, he has lived and worked in the area for over 20 years. When you’re looking for a seasoned and knowledgeable real estate agent in Phoenix, AZ, The Jeff Barchi team is here to help.Call Jeff Barchi today to discuss your next condo purchase in Phoenix, AZ!
