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Ok, so the fee is a little easier to justify when you start adding things like indoor parking, pool, sauna, gym, utilities and other amenities. I don't really understand how something like snow removal or lawn care could really add much in most of the condos I was looking at besides clearing the entryway and throwing some salt down in the winter. Yes the building itself requires maintenance too. I still don't get why so many charge $500-850. Even after paying off the entire mortgage you could end up still paying over $1000/month for association, tax and insurance. This just seems a bit crazy to me. Oh well, I guess we'll just stick with our house for now.
The high association fees (without all the benefits) might be due to the poor economy and some owners not paying their dues. I know of a couple of people who are pretty bad situations with their townhomes/condos. Over the last several years, a number of the units have gone into foreclosure- thus lowering the values for all the units. Association dues aren't being paid by a number of the owners and the units literally can't be sold because banks won't lend money when there are units in foreclosure. In these particular situations, nearly all the units are underwater with their mortgages and there really is little incentive to stay, thus a lot of people are bailing. I doubt the situation is as bad in some of the properties you are looking at, but it is a good idea to really understand the associations finances- if all the owners are paying, if there has been major repairs in the recent history and what is expected in the future. Also, make sure you understand rules around renting your unit, if you can't sell it in the future.
Twenty years, I was a week away from closing on a condo in a great old building on Grand Avenue. I walked away from the deal, when it was revealed that the association dues were actually double what had previously been communicated to me. They had recently gotten new roofs and had exterior brick work done.
Well, it's just something you have to consider, and yes, some are crazy, so it is the first thing to look at before you fall in love with a place. Older buildings especially can be very expensive what you get, due to more expensive and frequent repairs I guess. Also places with a lot of foreclosures (non-dues paying homeowners) can have the fees go up. Will they ever go back down? I don't know.
The most ridiculous case is the building where La Belle Vie is on Hennepin/Loring Park: The HOA fees are well over $1000/month for small apartments. This is all very commonplace in NYC though, and that building has a doorman and other amenities. Still, crazy!
In the end, yes it is in the short-term more expensive than a house, but you also will never pay for a major repair like replacing a roof, daily annoyance of maintaining lawn and snow removal, and you probably are in a more convenient/public transit/bike-friendly location which will save on gas and car expense, so you have to weigh all that.
I have not personally seen any places that include ALL utilities.
I have seen some that include Cable and heat, and some that do not, that is the main difference.
All include building maintenance and trash removal and any amenities the building has as a minimum.
Ok, so the fee is a little easier to justify when you start adding things like indoor parking, pool, sauna, gym, utilities and other amenities. I don't really understand how something like snow removal or lawn care could really add much in most of the condos I was looking at besides clearing the entryway and throwing some salt down in the winter. Yes the building itself requires maintenance too. I still don't get why so many charge $500-850. Even after paying off the entire mortgage you could end up still paying over $1000/month for association, tax and insurance. This just seems a bit crazy to me. Oh well, I guess we'll just stick with our house for now.
I do agree that it sounds extremely high to me, but I was in a HOA in a totally different area, so I don't have the best frame of references. If you were seriously interested, you should be able to request their finances and that should tell you where their money is going.
Ok, so the fee is a little easier to justify when you start adding things like indoor parking, pool, sauna, gym, utilities and other amenities. I don't really understand how something like snow removal or lawn care could really add much in most of the condos I was looking at besides clearing the entryway and throwing some salt down in the winter. Yes the building itself requires maintenance too. I still don't get why so many charge $500-850. Even after paying off the entire mortgage you could end up still paying over $1000/month for association, tax and insurance. This just seems a bit crazy to me. Oh well, I guess we'll just stick with our house for now.
It can definitely get high in some buildings. It probably doesn't help that you seemed to be looking at 2-3 bedrooms. I assume these are among the largest units in the building and probably have the highest "share" of the association fees (I've browsed condos for fun before and saw many times a studio unit had a significantly lower fee that that 1- or 2-bedroom place).
I talked to my friend--whose condo I mentioned in this thread before--about his situation and it seems he has a decent payment (just over $800/month on mortgage, insurance, taxes, etc...this is probably higher than GG quoted because he's paying insurance and taxes presumably on its value, which is significantly higher than he actually paid for it), but has a hefty HOA fee that approaches $400. The place doesn't have much for amenities. Just a small gym and some people get heated parking (he does not with his place). But it seems the property was in bad financial shape when he bought the place. So those payments are probably large to help restore the pool of money needed to repairs in the future.
Ok, so the fee is a little easier to justify when you start adding things like indoor parking, pool, sauna, gym, utilities and other amenities. I don't really understand how something like snow removal or lawn care could really add much in most of the condos I was looking at besides clearing the entryway and throwing some salt down in the winter. Yes the building itself requires maintenance too. I still don't get why so many charge $500-850. Even after paying off the entire mortgage you could end up still paying over $1000/month for association, tax and insurance. This just seems a bit crazy to me. Oh well, I guess we'll just stick with our house for now.
The lawn care and snow removal don't add that much, it's the outside maintenance on the buildings that costs so much-siding, roofs, etc. You also pay for the master Insurance policy in that association fee.
Those things are all rolled into your rent, which is why when you're comparing the rental cost to the owning cost renting comes out ahead in most of the Uptown and downtown condos, at least the ones I've casually priced. Of course the benefit of buying is that you know you won't have any huge rental increases in the coming years, and if you stay there long enough you won't have any mortgage, and your monthly payments for the other stuff is still going to be a lot lower than rent.
There is no prohibition against assessment increases....
If you purchase a condo you will have zero control over the increase in monthly assessments even after you own it. Rent has to be competitive, condo assessments do not. With condominiums you also have the risk of being sucked into the litigation vortex. For example, these days many boards also decide after you purchase that you should not be able to rent your unit out to anyone else. This will provoke lawsuits and also means that you might not be able to sell or rent out while trying to sell. Your ability to sell will be impacted throughout the litigation whether or not you are a party to it. There is a very large liability for condominium ownership that simply is not present at all with rent. Of course this doesn't even begin to address all the unscrupulous management companies or their predation on the condo members and condo bank accounts. Run do not walk from condo property!
Last edited by IC_deLight; 02-17-2013 at 08:45 AM..
The flipside to a condo--apartment building style place-is that they generally have a maintenance staff and as a landlord that can save a lot of issues if you are buying a unit as a rental property/investment. Townhomes not so much.
There is no prohibition against assessment increases....
If you purchase a condo you will have zero control over the increase in monthly assessments even after you own it. Rent has to be competitive, condo assessments do not. With condominiums you also have the risk of being sucked into the litigation vortex. For example, these days many boards also decide after you purchase that you should not be able to rent your unit out to anyone else. This will provoke lawsuits and also means that you might not be able to sell or rent out while trying to sell. Your ability to sell will be impacted throughout the litigation whether or not you are a party to it. There is a very large liability for condominium ownership that simply is not present at all with rent. Of course this doesn't even begin to address all the unscrupulous management companies or their predation on the condo members and condo bank accounts. Run do not walk from condo property!
I live in a condominium building in downtown St. Paul. Assessment increases must be approved by the Board of Directors. I've heard of some bad/corrupt ones (Gallery Tower comes to mind). Board members are elected by association members. Sadly a lot of members don't actively participate. If someone is sadled with high increases or rules changes that don't favor them, they likely have themselves to blame for not staying informed.
My dues are pretty reasonable for my area. Not the lowest but not the highest. I also appreciate the convenience they bring with them. Last year my building suffered a major power loss problem that lasted a couple weeks. Building management took care of everything. If I had a single family home and that occured, I would've had to do it. They made all the calls to the insurance companies, contractors, repairs, getting cost estimates, filling out forms, paperwork, etc. I would've probably lost several days of work and paid time off dealing with all that.
As for restrictions on being able to rent out your unit. Those sort of rules are in your by-laws. For newbies or those looking at condos, read them. My HOA is considering restricting them due to high number of rentals in my building. But that sort of thing has to be voted on and approved by the full association. So it's not something that can be easily thrusted on the association by a few Board members or management company.
When you are looking at used condo's, there is an inverse relationship to HOA's fees and the overall price of the condo. If you find a low price, many times the condo fees are high. Why? Not many people want to shell out $900 a month for an HOA fee. That high HOA fee is a poison pill for future buyers, Meaning, that condo doesn't easily sell and the price drops because of lower demand. When I was looking at FL condo's, I saw it time and time again; the "deals" had high HOA fees.
As others mentioned, high HOA's can happen from:
* a broke association.
* small reserve and they are building it up.
* more features that are amortized over fewer people.
* Features like paid parking and "fee" internet.
* Too many non-payers.
The small reserve is an important one. Some lower HOA fees have a small reserve and they vote on projects as "one time charges". We had that with our condo on the beach in Mexico. You would spend $2000 a year on updates over and above our cheap condo fees of $300 a month. So was it really $300 a month or $300 a month plus $2000/12?
Low condo prices can occur because there is an increased risk of ownership. Meaning, their ownership is low. Government financing such as HUD, Fannie, and Freddie will not engage in developments that have low occupancy. So the buyers (more or less) need cash. So the price drops as there is more risk to the buyer.
It's always good to stare really hard at the health of the HOA. Don't forget to look at the rules. Ask about special assessments, that are pending (as well as the ones before).
When I sold my Mexican condo, the new owner didn't know about the $1000 painting assessment that was around the corner. She didn't ask and I didn't tell her. It's her job to ask the association.
In any HOA, the rules can change and they are binding. You might of bought it for a vacation rental when you are not using it and the next thing you know they change the rules. That happened to us. They may no longer welcome a dog that is larger than so many pounds, etc. Heck, kids may not be welcome in the hot tub. Again, this happened to us.
In condos that have a high percentage of older owners it gets extremely political. Think "Del Boca Visa" (Sienfield episode.) As you might guess, I had some bad experiences with condos. For me, I won't buy one ever again. Especially where old people have too much time on their hand to make new rules. Your mileage may vary.
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