Many 20-somethings graduate college and move to the city. Not quite ready for homeownership, many of them may consider buying a condo.

Recently, I observed a billboard for a condo building in downtown Chicago that piqued my curiousity because it clearly was seeking to attract young professionals. I went home and looked on their website, which was sleek and obviously catering to the 20 to early 30s crowd. There were beautiful pictures of the high rise from the outside, pictures of the inside of different condos highlighting the beautiful city view, floor plans, and even interviews with a half dozen of the residents (all of them young professionals except for the token near retirement empty nester).

What really caught my interest was their page that declared, “You Can’t Afford Not To Buy!”

If I were a real estate novice, I would have to agree with their persuasive argument that I couldn’t afford not to buy. They base their scenario on renting an apartment for $1,350 a month with a 3% increase each year for 5 years. They base their buying scenario on securing a 5 year ARM at 3.236% and paying 3.5% down. Condo fees run $220 to $240 a month, and taxes are 1.5%. Based on this scenario, they persuasively argue that a buyer will save $389 a month by owning rather than renting. (They also include mortgage interest and tax deductions that the person will get on their income tax, assuming a 30% tax bracket.)

If these were all of the variables to consider, the marketing department is right, people can’t afford not to buy! Unfortunately, they have left out several other variables, namely condo fees you may not be aware of.

– PMI. Because the home owners only paid 3.5% down, they must pay private mortgage insurance (PMI) at an estimated cost of $150 a month. Conveniently, this was left out of the calculations.

– Closing costs. These vary, of course, but $5,000 to $6,000 is a reasonable figure.

– Increases in condo fees. When I called the marketing department to get more information on this property, I was assured that condo fees had not gone up in a year. Still, it is a good guess that they will go up sometime during the 5 year example the marketing department gives.

– Parking. True, many people don’t have a vehicle when they live in the city, but if you do and you want to buy a condo in this location, it will cost an extra $35,000!

– Mortgage interest. This scenario assumes the purchaser obtains an ARM. Unless you plan to sell the residence in 5 years or less, an ARM is generally a bad idea. Interest rates are currently at historic lows. It is likely that in five years mortgage rates will be higher than they are now, causing the buyer to pay more in interest.

Just taking into account the PMI and closing costs, the touted cost benefits of buying over renting nearly disappear. In addition, if the buyer wants to eventually sell the property, there are also realtor fees and closing costs on the other end. I am not trying to dissuade young people from buying condos as their first step into home ownership, but they should be advised that there are plenty of fees and costs associated with their purchase that the marketing department is less than willing to disclose.