What’s the Better Investment: Condo or Single Family Home?

Here in Illinois, with today’s real estate and housing market, making a decision between selecting a condo or a single family home isn’t easy and there are many obvious pitfalls.

The short answer that wins regarding whether to buy a condo or a single family home….my choice from here on out is the single family home. Without a doubt.

1. State of Illinois Has Out of Control Workers’ Compensation Costs
Illinois is one of the states most affected by workers’ comp. (6th worst according to Lexisnexis.com), affecting condo owners, townhouse owners, community associations, and anywhere the contractors and subs are require to have high liability premiums as well as costly workers’ comp. in order to work on the premises. In simple terms, it costs a huge premium to hire expensive wage workers, which in this economy, tend to be the affiliated with the few companies that can afford to carry such insurance.

In a single family home, you should still hire qualified workers with enough insurance (depending on the overall value of your home) with workers’ comp. However, it won’t cost you the higher premium for a single family home than it costs for a condo, where many of the workers are insured to the max in order to work on the premises and costs are shared.

2. Assessments
This is something you simply don’t have in owning a home. You don’t have several workers like a door man, maintenance guy working full time, and so many laborers. Then on top of that, management fees to cover. And maintenance on everything under the sun.

These costs are shared based off the % of ownership of all the unit owners. For example, if your condo doesn’t have a deck but many others in your complex do, you may be assessed anyway because it may go considered as structural depending on its construction,  and those costs often are shared among all unit owners. I had a friend whose dry cleaning lady in her building was assessed 50K to pay for a deck when she didn’t have a deck. Not to mention that assessments only go up!  Consider that. Assessments, like property taxes, only go up. You have to really think about that when buying a condo.

In a single family home, if you are smart enough to hire a structural engineer to look very closely at all aspects of the house and you still find a good home, then what you see is what you get.  If you bought the house, then it’s yours, and there are no shared or subsidized costs or percentages of ownership.  These advantages tend to make single family home ownership a more cost conscious investment.

3. The More Systems to Maintain in the Building and Amenities
The more systems and amenities for upkeep there is in a condo, the higher the assessments and later, the special assessments will be. All areas of a condo building needs maintenance, even parking garages.

If something breaks in a condo (it doesn’t have to be yours), it’s going to cost you.  If something wears, it will cost you. Your costs are utilities , operating costs &  maintenance upkeep, and then the very expensive capital costs.  There is always work to do everyday of every week to the building and projects every month.

With single family homes there are only so many systems in a house,  and you don’t have to pay for other unit’s problems. So nice!

4. Warranty is Only as Good as the Maintenance on It
Condos often come with warranties which require additional maintenance.  For example, the builder leaves you with a decent roof….well you can’t just let it sit for 20 some years . You have to make sure that leaves and debris are clear of all the drains several times a year, the gutters if you are in a townhouse that has them, that you have heating cables for the winter for your flat roof, that you keep checking the flashing, recoat the silver coating when it starts to chip and flake and have a roofer up on the roof, once a year to walk it and make sure everything is wearing well.

So if you have hallway carpeting, you need to vacuum it weekly and then shampoo it at least one to two times yearly  to get 10-15 years out of it.

In other words, if your developer did his scope of work per the architects specifications,  and they have been confirmed to be correct specs by a structural engineer, then it up to you to make sure it continued to be maintained correctly from there on out.

5. Lawsuits Occur for Stupid Reasons in Condo Buildings
Condos have board members and management companies.  If the condo falls into a lawsuit, if they are sued, then it will end up costing the entire complex’s residents more assessment money. And there is nothing to stop a condo from being the subject of frivolous lawsuits. People not getting along, pet issues, parking issues, vendettas, a lawyer in the building who doesn’t like how the board is spending money……

Single family homes lack the board members and administrators and community drama which typically leads to these things.

6. Condo Unit Owners are Subject to Board Members Making Poor Decisions on Everyone’s Behalf
Condo board members don’t have to be qualified with an education in condo management to be on a condo board. Which I think is a problem that should be addressed when people are responsible for such large assets. There are often cases of money embezzlement from either a board member and surprisingly its happened with condo management as well.

As a unit owner, I don’t trust my management completely…I stay involved. And board members need to be armed with working knowledge in order to lead people in the building and to be able to sell budgets that need to be passed in order to properly maintain the building.

In a single family home, you decide how money should be spent in your home. There is no board for you to depend on or no management company to deal with. Your only drama will be from immediate neighbors .

7.  City population is Going Down, Not Up

The last census results came and and surprisingly show the city population level significantly down to 1920 levels.  Yes, its true.  It’s been all over the news, Chicago’s population is way down in the city.

People have choices now. They don’t have to live in the city to get sophisticated shopping and restaurants anymore.  Downtown Naperville is filled with gorgeous little shops and restaurants. Some downtowns are more charming than others, but smart entrepreneurs have opened shops and eateries focusing on those ex city dwellers who now have kids, and are craving a few hubs to hang out at. Where once there was a void, the voids have been filled.

But by far, the biggest motivator to real estate buyers for getting out of the city is the Chicago public school system. Parents want better schools for their kids and are willing to pay a premium to get them to the right areas where they feel their kids will be safer,  and will get a better education.

8. Chicago Condos are Plagued with Construction Issues
The city has often been blamed with many of the construction problems that plague city condos. But mainly, it’s the fault of the builder who ultimately is responsible to do the work to a certain standard.  For the most part, builders are either too cheap to hire structural engineers to check/verify all their plans, or the builder decides he wants to do things his way, and where the city is at fault is that they let the builder stray from a stamped , approved plan. Which usually means the builder gets to cut corners at the buyers expense later.

This has become a MAJOR problem  in the city. If see it as legal theft–why would it be anything less?

And its my final reason for encouraging buyers to stay away from condos units because they are so often ticking time bombs of assessments to come-that don’t make them affordable at all.

Photo courtesy of clarita.


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2 responses to “What’s the Better Investment: Condo or Single Family Home?”

  1. Carole says :

    Great Article. I live in a condo, and I hate it!! Do not make the mistake of buying these money pit hell holes. Our board refuses to fix the gutters or maintain the building. We have women who run the board who have absolutely no idea what they are doing, and one member actually broke into someone’s unit. Condos are nightmares.

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