The Difference Between an Apartment and a Condo (and How to Determine Which is Right for You)

Image by Canva.com

At first glance, there is little difference between an apartment and a condo. Both share a building with other dwellings and attract people who do not want a single-family, stand-alone home with a yard. But there are many differences, too, and understanding the characteristics of apartments and condos—and when each option makes the most sense—is helpful when looking for a new place to live.

People who choose an apartment or a condo typically do so for a variety of reasons. They may not be able to afford a house. Or, they do not want or need what a traditional house has to offer. Condos and apartments tend to be smaller and need less maintenance.

Singles, empty-nesters, and young people moving out of Mom and Dad’s house for the first time are some groups that might opt for an apartment or condominium. 

Regardless of the reasons, there are things to consider when making the decision between the two:

The most notable difference between an apartment and a condo is ownership. A tenant in an apartment signs a rental agreement with the owner of the building and pays rent every month. At the end of the lease, they may move out or sign a new agreement and stay. 

A condominium, on the other hand, is treated like a house. A buyer purchases an individual unit to either live in or rent out to someone else. They own it—and build equity—until they choose to sell it. 

Since apartments and condos are both in buildings with more than one unit, there is often shared space, too. Common areas such as a lobby, hallway, or outdoor space are there for everyone who lives in the building or complex. Ownership and responsibility for those spaces differ, however. 

A landlord owns the common areas in an apartment building and is responsible for taking care of them. They may do this themselves or hire a management company. In a condo building, all of the individual owners share a joint interest in common areas and it is up to them—through a condominium association—to make decisions and arrange for their upkeep.

Buying a condo unit is similar to buying a single-family home. The buyer will need to save for a down payment and find a mortgage lender. Condos are often less expensive than houses, making them a more economical choice. Some lenders, however, have rules about condo loans. For example, they may insist on buildings with a certain percentage of owner-occupied units.

Owners list condos with real estate agents, just like houses. This includes determining an asking price, showing the unit, and fielding offers from interested buyers. Negotiations and the inspection process are the same as with a house. The sale includes the usual closing costs, too.

Moving into an apartment does not involve jumping through as many financial hoops, although a renter will need to prove they have the means to pay the rent. Reputable landlords and property management companies do a thorough credit check for financial stability and a background check for criminal activity. They may ask for references from prior landlords.

The tenant will usually need to pay a security deposit (which, as long as there is not significant damage to the apartment, is refunded when they move out) and often the first and last month’s rent. As long as everything checks out, a tenant will be given the keys to the apartment and can move in right away. 

Image by Canva.com

Another very significant difference between an apartment and a condo is who is responsible for various expenses.

Renters are expected to keep their apartments clean and not damage the property. But other than their personal property and furniture (unless the unit comes furnished) everything belongs to the owner of the building. If something breaks or needs replacing, it is up to the landlord to take care of the problem and pay for it. They will periodically paint, replace fixtures and flooring, and buy new appliances when necessary. Landscaping, hallways, amenities (like swimming pools, etc.), are all the responsibility of the owner or their management company. 

Condo owners are responsible for everything within their unit. If the refrigerator quits or they need new carpeting, it is up to them to arrange and pay for the fix. Common areas of a condo building or complex are governed by a condominium association. Owners collectively contribute to a fund that helps pay for what is necessary in these spaces. (We’ll explain more about condominium associates below.) 

There is little difference between an apartment and a condo when it comes to daily life. Multi-unit buildings mean living very close to neighbors and sharing walls. Privacy issues, noise, and other annoyances can be factors for both condo owners and renters. 

Compared to a house, however, people in both apartments and condos do not have to worry about cutting grass or shoveling snow, as common areas are taken care of for them. 

Apartment dwellers are subject to certain restrictions laid out for them by the landlord in their lease. The rules may prohibit them from owning a pet, smoking, or making certain changes inside the unit. For example, choosing a new paint color or switching out light fixtures may require permission from the landlord, if it is allowed at all. 

Buying a condo means the occupant owns the unit and can decorate the interior any way they like. They can buy whatever type of appliances they wish and opt for flooring and fixtures that suit their individual taste. That said, there are some major changes—for example knocking out a wall—that might need approval from the condominium association. 

Image by Canva.com

For those considering a condo, it is important to learn about the rules and costs of any association that applies to a property. Like a homeowner’s association (HOA), a condo owners association (COA) collects monthly dues from residents. That money is used to take care of common areas and the structure itself. For example, clearing snow in the winter or installing a new roof. The members elect a board and share in the decision-making process about how the money is spent, getting bids for work, etc. The association also determines rules and regulations and their enforcement.

Some condo owners might find a COA’s rules to be as restrictive as an apartment’s. For example, the association can decide to ban pets, limit what is kept on balconies, or prohibit certain seasonal decorations. Before purchasing a condo, it is important for buyers to understand how strict the COA’s rules are, and decide if they can live with the restrictions.

In an apartment, renters pay higher rent for more amenities. A property with a doorman, luxurious lobby, swimming pool, and workout room is going to cost more. The same goes for a condo and its COA fees. The more resources and extras, the higher the fees. COA fees vary greatly by region as well as amenities, but most average about $300 per month. 

Missouri does not have rules for homeowners associations, but they do have laws governing condominium associations. The Missouri Condominium Property Act covers all condo associations formed prior to September 28, 1983. Associations organized after that date are covered by the Missouri Uniform Condominium Act. In Illinois, the Illinois Condominium Property Act is in effect. 

These Acts lay out rules for how the organizations must be organized. There are specific requirements regarding bylaws, meetings, and voting, as well as strict anti-discrimination enforcement. 

While renting is usually considered cheaper than buying, this has not necessarily been true during the recent hot housing market. Rental rates have become more expensive than ever, so a purchase, and the chance to build equity has become more attractive. 

To make a decision to rent an apartment or buy a condo, it is helpful to ask the following questions:

• Do you have a sufficient down payment, credit rating, and earning potential to afford to buy? 
• How long do you plan to stay? The average break-even time in St. Louis is 3.6 years. Anything less than two years could result in a costly tax bill.
• Are you ready for all that homeownership entails?

For many, renting makes the most sense. Finding an apartment with top-notch management can take the worry of maintenance and repairs. And it is much easier to move at the end of a lease than to find a buyer, especially when the real estate market slows.

But if all of the answers point to buying, and the idea of a condominium community is appealing, contact Berkshire Hathaway HomeService Select Properties. One of our agents will be happy to help you as you start your search for the perfect condo in the St. Louis region and the Metro East.