In recent months there has been a surge nationally in condominium sales volume and average price. With most condos more affordable than single family homes, this may be a trend that isn’t going away any time soon. Millennials have started dipping in the condo buyer pool instead of looking for starter single family properties. While condo living has numerous benefits, unless you plan on taking full advantage of all the services and amenities offered, you may be throwing money away every month.
Every condo has a set of specific fees that are included in the payment. Depending on the complex these can add hundreds of extra dollars and change the way you look at the property. If you are considering a condo purchase, you need to know what you are getting for your money. Here are the four main components of your condominium homeowner’s association payment.
Maintenance. One of the main perks of condo living is the maintenance offered. They will not repair everything like a rental, but they do several items you may not have expected. For starters, they will handle exterior maintenance including lawn mowing and care of any shrubs. Not only does this cut down on the cost of a mower but may save your back in the process. Most condos also include snow removal as well. Anyone that lives in a high snow area knows just how much fun it is shoveling a foot of snow. They also do periodic driveway improvements and will also remove any trash. Every association is different but basic maintenance is condo purchase staple.
Amenities. A condo complex can consist of five units off a quiet road or five hundred near a busy intersection. If you have never looked you may be surprised at the variety of complex’s available. Included in your association fees are costs for use of any amenities on site. In a small complex this could be a pass to the parking lot or a security guard on site. In larger complex’s this could be access to a swimming pool, basketball court or weight room. The more amenities generally the higher the association fees.
Insurance. In the monthly payment for your condo you have your loan principal & interest, taxes and the association fee. What you don’t see at first glance is any payment for homeowner’s insurance. This is because the homeowner’s insurance is included in the association fee. Every condo association is required to hold a master policy for all units in the complex. As you can imagine this can get expensive and unfortunately the cost is passed on to the homeowner. With the cost of single family homeowner’s insurance on the rise, condo owners may be getting the better end of the homeowner’s deal.
Reserves. As part of the association they are liable for everything that happens in the complex. It is not uncommon for an injury to occur on site that can drain the reserves of the association. Dealing with litigation for a slip and fall or an injury at the pool may seem frivolous but can be quite expensive. Every complex must maintain a certain amount in reserves to keep their insurance in good standing. If the reserves are low, you can expect a bump in your monthly fees. With hundreds of units the increase won’t be substantial but in a smaller complex this will have a big impact on the payment.
Condo affordability is based on how much you plan on using the amenities offered. If you will use the pool for morning laps it may be enough to offset the proximity of your neighbors. Knowing what the association payment is being used for should give you some perspective if it is money well spent.