Which costs more: A single-family home or a condo?

Most of us tend to believe that downtown condo living is expensive—certainly more so than living in a suburban single-family home.  But what if I could shatter that preconceived notion that urban living is prohibitively expensive?

I decided to do a quick and dirty analysis of two equally priced properties for sale in Austin—one a typical Ranch-style home in the northwest part of town, the other a trendy condominium in the heart of downtown.  Naturally, I had to make some assumptions about the potential buyer to make the comparison fair.  I assumed that a couple would be making the purchase, and that both work somewhere in downtown.

Here’s what I started with:

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The biggest contrast here is that the downtown property is much smaller than the house out in the ‘burbs, thus making the per-square-foot cost for the condo much higher than for the house.  That should come as no surprise.  Assuming this couple is more concerned about location than square footage, we’ll soon see how this plays out in the calculations.  First, the comparison of monthly mortgage costs:

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Because the properties are the same price, the mortgage differs primarily in the required condo fee at the downtown condo (the property taxes vary as well, but not significantly).  The single-family home is in a neighborhood without a homeowners’ association, so there are no monthly dues in this example.

One area that buyers tend to ignore is utility costs.  When you consider square footage here, it seems obvious that electricity would cost less in the condo.  More than that, though, condos are usually insulated by their adjacency to other units, thereby helping keep heating and cooling costs lower than a home with four or more walls exposed to the elements.  One caveat in this example: I contacted Austin Energy for history of energy consumption in these two homes, but was denied.  Therefore, I had to establish averages based on internet research and assumptions about my own past electricity usage.  I believe that if real-world data were available for these properties the disparity between utility costs would be even greater than what I’ve shown below:

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Another major difference between the condo and single-family home is in predicted transportation costs.  For the condo example (left column) I assumed both people could commute without owning a car.  They would get around reasonably by walking, public transportation, Austin’s new bike share program, and occasional use of Car2Go.  In the suburban example (right column) I used Edmunds’ True Cost to Own to estimate expenses for two vehicles—a new 2013 Toyota Prius and a paid-off 2009 Toyota RAV4 in its fifth year of ownership:

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Maintenance is another factor influencing the overall cost of owning a condominium versus owning a single-family house.  As you’ll see in the chart below, certain responsibilities and their associated expenses fall on the condo association (left column), whereas suburban homeowners take on those costs directly (right column):

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Because the condominium property includes a well-equipped fitness center and 24-hour concierge, we can assume that the couple would not need gym memberships or a separate wired home security system, as might be typical expenses for a suburban homeowner:

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There are also other conveniences that come with living centrally versus living out in a suburban neighborhood.  Note that the nearest LStar Rail Station is a planned stop; the system has yet to be built:

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So what’s the grand total?

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In this hypothetical example it will cost the couple an average of 53 percent more to live in the single-family home than they’d pay for the downtown condo, even when their home values are equal.  Just imagine what you could do with an extra $1724 a month!

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7 responses to “Which costs more: A single-family home or a condo?”

  1. mdahmus says :

    The odds that a couple living in that condominium would own 0 cars (making the depreciation argument valid) is nearly 0. They might be able to get by with one instead of two, but that’s pretty much it. (That’s still enough to make a big difference of course).

    I do appreciate that you haven’t made the typical mistake of assuming depreciation is per-mile instead of per-year, so well done on that.

  2. syarak says :

    I think you can credit a discount on homeowners insurance to the condo too. The building insurance is covered with the HOA fees. The actual loss risk in the owner’s unit is much smaller, so I expect the premium would be lower.

  3. Riley Lloyd says :

    I do appreciate the analysis and for stating the comparison of this two kinds of properties. After all, it is not just the price that matters or the convenience that it brings. For some reason, it depends upon the purpose or let’s say the personality of the certain buyer.

  4. Edward Wendel says :

    You’re saying it costs $1,777 per month to own a car???????

  5. Bill says :

    a condo with 704 square would include ma fees more likely of 400$.
    The house has a lot more square footage, so if divided in two and rented out ie basement apartment your expenses are reduced significantly.
    The house is appreciating way more then a condo in this marketplace, so your making much more money on your investment.
    Unless your factoring convenience as your ultimate priority and want to pay a healthy premium for this, it’s a no brainer go with house

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