What's the Difference Between an Apartment Building and Condo?
Today I want to talk to you about the difference between a condominium, a condo, and or an apartment building or an apartments plan unit. The main difference is this: now when it comes to physical attributes, they’re both pretty much the same thing. You got a unit and a condo. You got a unit and an apartment building complex, yourent them out, not a big deal, they both are very very similar: bedrooms, baths, square footage, all that good stuff.
Now the main difference of course then is the ownership. Who owns these complexes? Who owns the units in that apartment building ? When it comes to an apartments plan building , an apartment building typically is owned by a huge corporation. It can be owned by a single entity or one person, but typically it could be owned by a huge corporation, several units under one umbrella of this apartments plan complex, not a big deal. When it comes to a condominium, it is typically owned by one entity, one person, which is managed by an HOA, which stands for homeowners association. They govern the complex, the homeowner owner owns the unit.
Now let’s just ask ourselves, what is an HOA? What is a homeowners’ association? Now every condominium complex. I’m talking about a huge complex, some of them have10 units, some of them 20, heck, some of them have 50, depending on the size of the complexes,there’s several units in these complexes, several little apartment buildings. They look like apartment buildings, but they’re actual individual units. When it comes to the cost of a condominium or an apartments plan building unit, they’re very similar again depending on the location, location,location. Depending on the bedrooms, number of baths,square footage. They’re similar, and of course they’ll have very similar costs. Now when it comes to homeowners’ association,it’s a government.
It’s almost a small government that’s going to manage the entire complex, collect the fees of the entire complex, and make up the rules and regulations for this entire complex. So what is the HOA, homeowners’ association? Each individual home owner in this condominium complex pays their fees to make sure all of these items are covered.
Typically the HOA fees would include the maintenance of the building, they would include insurance for the building, the exterior of the building,not inside the units, but the exterior, so if it includes maintenance, it would include insurance. It would include maintenance of the pool,and if they have a gym, things of that nature. So by paying all these homeowners’ association dues every single month, they’re all covered for the homeowner.
So how do homeowners’ association dues affect listings? This is huge in the real estate world. This is very very huge. This is the deal. Let’s assume you get a listing. Yay, I got a listing in Westwood. Westwood, California, Los Angeles. The listing is for a million dollars. You say, “Yay, that’s great.” So you have a buyer who’s interested. A buyer of course typically would get a home loan. So he gets his home loan and his lender tellshim, “Hey listen, if you want to get a loan for a million dollars, your payment is gonna be…
” Let’s assume, for the sake of argument, it’s gonna be $5,000 per month. Yay, that’s good. But you didn’t consider the homeowners’ association dues that’s going to be due every single month. So on top of the $5,000, there are some homeowners association dues that could go up to $2,000 per month. You have to pay the $5,000 on your mortgage,plus the additional $2,000 for the homeowners’ association dues every single month. That’s quite a drastic change there.
That’s $7,000 total. You didn’t expect that extra $2,000 did you? This is why it’s very important that when you do get a home loan, you must make certain that you know the amount of the homeowners association dues so that you can inform, who? That’s right. Your lender. They will take that payment of the homeowners association dues into consideration when they’re giving you the monthly payment that you qualify for.
Most people want a very low homeowners association dues. But some of them are very very high, but because they are very very high, you do get a lot more rewards: bigger pool, maybe, bigger amenities. Some of them even have valet services for you. So of course, depending on the location, the type of complex, expect the fees to go from very minimal to large.
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