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Can you buy an apartment instead of renting?

Yahoo Personal Finance· Getty Images
Updated 9 min read

With home prices skyrocketing in the past few years, many Americans feel they have been priced out of homeownership. But renting isn’t that affordable either. According to a report from Harvard’s Joint Center for Housing Studies, half of all renters were shelling out more than 30% of their income on rent and utilities in 2022.

If you want to build long-term wealth by accumulating home equity but can’t afford a single-family home yet, you might be wondering if you can just buy an apartment unit outright instead of renting it.

Here’s everything you need to know.

Learn more: How to decide between a single-family vs. multifamily home

In this article:

Yes and no. You can buy an apartment — but when you’re thinking about buying an apartment instead of renting, you're most likely referring to buying a condo. You can’t actually buy units in apartment buildings where you’d typically rent.

Though a lot of people use the terms “condo” and “apartment” interchangeably, they’re not exactly the same thing. With a condo, the unit (usually within a larger building, similar to apartment buildings) is owned by an individual who can rent out or sell it if they want to. In contrast, an apartment unit is owned and rented out by the same owner — typically a property management company — along with all other units in an apartment complex. You can only rent an apartment unit, but you can buy a condo.

Another alternative is buying into a co-op. A co-op building often looks like an apartment building. A co-op is similar to a condo, but there are key differences.

Dig deeper: How to decide between a condo versus a house

Besides purchasing a condo, buying an apartment could also mean buying into a co-op, short for cooperative housing. When you buy into a co-op, you’re essentially buying shares in a corporation that allows you to live in a unit, and a board governs the co-op. So, even though you don't technically buy your own unit, you’re entitled to exclusive use of a unit in the property as a shareholder.

When you buy a condo, you own your unit outright, and this unit is typically within a multi-unit housing complex. As the owner, you’re not only responsible for the maintenance and upkeep of your individual unit, but you’ll also have to pay monthly homeowners’ association fees, which will go toward the maintenance and upkeep of shared spaces.

While a condo isn’t exactly an apartment, it is worth considering. Here are some pros and cons for potential homebuyers to consider.

  • Cheaper than traditional homes. Condos are typically significantly cheaper than regular houses. If you’re priced out of single-family homes, you may want to look into buying a condo.

  • Allows you to build equity. Compared to renting an apartment, buying a condo will help you to start building equity in a property of your own, which can be a great way to increase your net worth and financial security.

  • Maintenance and repairs are off your plate. As a condo owner, you’re mainly responsible for the maintenance and repairs of your own unit. Everything else is handled by the homeowners’ association, which means no shoveling snow, mowing the lawn, or painting walls.

  • Homeowners’ association rules and fees. One of the most significant downsides of buying a condo is paying a homeowners’ association fee to help keep common areas well-maintained. These fees could range from less than $100 per month to more than $1,000 depending on the condo’s location and which services are included.

  • No land ownership. Condos are often cheaper than single-family homes because they typically don’t come with land. If land ownership is important to you, purchasing a condo may not be the best option since you only own the airspace within the walls of your unit.

  • Lack of privacy. Living in a condo means you’re sharing walls with neighbors. This may not be an issue if you’re used to living in apartments. But if you’re downsizing from a single-family home, a condo’s lack of privacy might be a deal breaker.

The biggest difference between a condo and a co-op boils down to ownership. With condos, you own an individual unit; with co-ops, you own shares in a building.

Consider these pros and cons of buying into a co-op to determine if it’s right for you.

  • Affordability. Co-ops are generally less expensive than single-family homes and even condos.

  • Less responsibility. Like condo owners, you typically have limited responsibilities when it comes to maintaining common areas as a cooperative shareholder. This can be nice if you’re used to renting an apartment from a landlord since you won’t have to take on a lot of the responsibilities that come with buying other types of homes.

  • Tax deductions: Though co-ops aren’t technically real estate, you’ll still have certain tax benefits as a co-op shareholder, such as deducting mortgage interest and property taxes on your federal income tax return. Other home types have this benefit, too, but it’s important to know that you don’t lose that perk when buying into a co-op.

  • Tedious application process. Applying to live in a co-op can be difficult and take a long time because your application must be approved by the board. This also opens you up to the possibility of discrimination. However, you have legal rights, so if you believe you’re experiencing discrimination in the interview process, you can file a complaint with the U.S. Department of Housing and Urban Development.

  • Some cooperatives don’t allow financing. Since you’re purchasing stock in the company that owns the building, not a piece of real estate, getting financing from mortgage lenders can be tricky with a co-op. Instead of traditional home loans, you may need to look into a co-op or share loan.

  • Strict policies regarding renting. The ability to rent out your unit is subject to board approval, and many co-ops are quite strict about subletting. So, you may want to think twice if you’re buying into a cooperative and planning to earn rental income.

Purchasing a property is one of the largest financial decisions you can make. Before becoming a condo owner or buying into a co-op, here are a few things to consider:

Location is one of the most important factors to keep in mind when buying real estate because where the property is situated can greatly affect its value. For example, purchasing an apartment in an up-and-coming city may be a safer bet than investing in a property in an area with high crime statistics — but it could also be more expensive than buying in a smaller area. Think about your priorities regarding how location affects your budget and quality of life.

If a condo or co-op unit is old and in poor condition, you may have to shell out more money to fix issues with plumbing, appliances, the roof, or other parts of the property. So, always work with a certified and reputable home inspector to look at all major systems with the unit before buying it.

Dig deeper: Buying a new construction home — Pros, cons, and how to finance it

If you’re buying a condo unit to generate passive rental income, you'll want to find one in an area that will allow you to make positive returns with real estate investing. Check out online listings, talk to a real estate agent, or contact a property management company to better understand the average rental prices in an area.

The amenities in an apartment complex, like swimming pools and fitness centers, can make or break your experience living there, so always take the time to tour the common areas before deciding. Real estate marketplaces like Zillow allow you to personalize your search to find properties that offer your desired amenities by adding filters.

Homeowners’ associations and co-op boards have regulations that condo owners and co-op shareholders must follow. Violating their rules can lead to hefty fines, so make sure you know what these regulations are before signing on the dotted line.

Read more: Modular versus manufactured homes

An apartment could be the right fit for you. But if you're interested in buying instead of renting, one of the following housing types could be a better fit.

Technically, you can’t own an apartment unit — but you can own a condo or buy into a co-op, which is similar. Owning a condo unit or co-op shares can be solid investments, but for different reasons. While co-ops typically have strict rules about generating rental income, the cost of buying into a co-op is generally lower than a similarly priced condo. And though condos tend to be pricier, you can rent out your unit without restrictions to generate a steady cash flow — which is most likely why some real estate investors gravitate toward condos instead of co-ops.

It depends. Location, market conditions, and property type can all affect how much it costs to live in an apartment or a house. You could pay upwards of $3,000 on monthly rent for a tiny one-bedroom apartment in Brickell, Miami, whereas the mortgage for a spacious single-family home in Provo, Utah, may cost a similar amount or less. But generally speaking, there are fewer up-front costs associated with renting an apartment compared to buying a house since you won’t have to stress about down payments or closing costs on a mortgage loan.

The better choice between a co-op and condo depends largely on what you’re looking for. With a condo, you own the unit outright. With a cooperative, you don’t technically own any real estate but instead shares of a company that owns the building. These shares then entitle you to a living space within that building. If you’re looking to buy a property to earn rental income, though, a condo may be a safer bet since co-ops can be pretty strict about subletting. In many cases, you'll need board approval to rent your unit.

This article was edited by Laura Grace Tarpley