Can You Buy an Apartment?

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.). Because fees depend on what a building offers, two condos at similar prices can have very different monthly costs. Debbie Drummond of The Las Vegas Luxury Home Pro says:

“The biggest factors to consider are HOA fees, amenities, and financing: traditional condo communities typically have more moderate HOA fees, while high-rise buildings often charge more in exchange for amenities such as doormen, valet parking and front-desk services.

Buyers should check with their lender about the financing requirements for the community they’re considering, including FHA or VA approval. The monthly HOA fee is included when calculating their overall housing expense, and a high fee can reduce the mortgage amount they qualify for. If a high HOA fee makes purchasing in a high-rise tower less affordable, renting may be worth considering as an alternative to buying.”

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 buying a house and renting 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, you may also pay what’s called ground rent, in addition to any other housing costs.

Having a leasehold does set you apart from those who rent. Rather than asking permission for home improvements in apartments, you may have more freedom to renovate, depending on the terms of your lease.

Which type of apartment you can buy depends on the market

Condos, co-ops, and leaseholds aren’t equally available everywhere, so it helps to hear from an agent who knows the local inventory. Andrew Finney of King Realty Group in Las Vegas, NV says:

“Most apartments you can buy are condos, where you own your unit and share ownership of the common areas through the HOA. Co-ops and leaseholds are rare here, so the bigger questions are about the HOA: what the monthly dues cover, how healthy the reserves are, and whether any special assessments are coming. Financing matters too, because some condo projects aren’t approved for FHA or VA loans or don’t meet conventional lender guidelines, which can limit your loan options. If you plan to stay put for several years, buying can make more sense than renting, but compare the full monthly cost, including dues and insurance, side by side with rent before you decide.”

Knowing what you can borrow before you start looking can make those conversations easier. 

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 anywhere from 3% to 20% of your purchase price, in addition to several other fees, including closing costs. You also need to have enough income to support your ground rent or mortgage payments (plus property taxes). To determine how much house you can 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 you will 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.

Look at the building’s finances

Once you’ve settled on a budget and timeline, the association’s finances are worth a close look, since you share the cost of the whole building in a condo or co-op. Nick Booth Real Estate in Salt Lake City, UT says:

“What shocks most buyers is that the building and the HOA matter way more than the unit itself. Before you commit, get a copy of the HOA’s reserve study and budget, because most buyers never think to ask for it. A thin reserve fund and overspending today are what lead to the surprise special assessments you get hit with later. If you plan to stay at least five years and your total monthly cost is close to rent, buying usually makes sense.”

When you find a unit you like, a condo inspection can help you understand its condition before you commit.

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. 

FAQ: Can you buy an apartment?

1. What’s the difference between an apartment and a condo?

An apartment is typically a rental unit in a building owned by a single landlord or company. A condo is a unit you own individually, along with a share of the building’s common areas, and it’s usually managed by an HOA.

2. Can you get a mortgage to buy a condo or co-op?

Often, yes, though requirements vary by loan type and by building. As the experts above note, some condo projects aren’t approved for FHA or VA loans, so it’s worth asking a lender about the specific building early on.

3. What do HOA fees cover?

HOA fees generally go toward maintaining shared spaces and amenities, such as roofs, landscaping, and recreational facilities. What’s included differs by building, so ask for a breakdown of what the monthly dues cover.

4. What is a special assessment?

A special assessment is an additional charge an HOA can levy on owners, often to cover a large repair or a shortfall in reserves. Reviewing the HOA’s reserve study and budget before you buy can help you gauge the risk.

5. Is buying an apartment cheaper than renting?

It depends on the building, the local market, and how long you plan to stay. Compare your full monthly cost of owning, including mortgage payments, HOA dues, insurance, and property taxes, with what you’d pay in rent. Redfin’s rent vs. buy calculator can help with that comparison.

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