Is buying a condo better than renting?

[Paul Henning]

If a SFH or MFH is outside my borrowing limit in the area we just moved to (Denver) to make more money, is it better to buy a condo that I can afford OR just rent until the money comes in for the house?

I learned that condos are to be avoided, but can I make an exception?

All FHA or vet loans right now, we will live in any property for at least the year.

Cheers!

[Lizzie Carver]

As the comments always say......."it depends"! Definitely rent first when moving to a new area to get a feel for where you want to live/invest. I relocated to Denver from DC two years ago--had I bought first thing, I would have wanted to be in walkable downtown which, after renting, I quickly realized was not what I wanted. My boyfriend and I ended up buying a duplex in Athmar Park which is an area I highly recommend investing in.

First question is what your space/location needs and preferences are and comparing your monthly rent to the monthly expenses of a condo. What usually kills the cash flow is the HOA fee and personally I don't like rules and regulations that are ever-changing that may restrict rental rights. If you are looking to live there and potentially rent out in the future, or sell and make some money after some appreciation and equity from paying down your mortgage instead of paying rent, it could be a good option. Long post, but here's a recap of my story you may find tidbits of helpful...

Four years ago I was renting a studio apartment in a prime area of DC for $1600 and was able to save very little each month toward a down payment. I finally cobbled together just enough for a down payment on a 1 bedroom condo on the other side of town. The mortgage + HOA fees were only slightly more than I was paying in rent. Not cheaper, but a way for me to spend roughly the same each month but be able to build some equity in a neighborhood I felt super good about being the "next best thing" as it was still quite an easy commute to downtown offices and trendy hangout spots. Two years later I decided to move to Denver and rented out my condo--I unfortunately just broke even and didn't cash flow but it was a way for me to get a tenant to keep building my equity before I sold it a little over a year later. The day I moved to Denver a Trader Joe's opened up in the neighborhood and several large developments were finally underway and when I sold a year later (so owned for 3 years--lived in for 2 and rented for 1) I netted $50k. I like to tell this story because it illustrates a simple, repeatable, low-risk way to get started and go from thinking you can't get into real estate to giving you a chunk of cash to then go buy something bigger with.