Whether you are a first-time buyer or a seasoned investor, you want to pay attention to condo fees – how much are they each month and what do you get for them.
I tell all my clients to pay attention to their total monthly cost of owning a condo, not just the asking price.
The total monthly cost will be the sum of the mortgage payment (principal and interest), property taxes, insurance and condo fees.
If condos in a particular building look like they are priced to low, check the condo fees. Often, high condo fees will depress the sales price.
Of course, you want to know what you are getting for your monthly condo fee. Some people want a no frills building with a low fee. Other people want the 24x7 front desk, swimming pool, party room and fitness center – and are willing to pay for it.
A condo, short for condominium, is a type of real estate divided into multiple units that are each separately owned but are surrounded by common areas jointly owned. Most people picture a condo as a high rise building, but a condo can also be comprised of ‘detached condos’ that look like single-family homes but the yards, building exteriors, and streets are jointly owned and maintained by the association.
Condo fees are your percentage share of the costs to run the building as a whole. The fee percentage is often calculated by the size of your unit, either by square feet or the number of bedrooms. The fees are not a profit source for building management; in fact, each building is registered as a nonprofit corporation.
Here are some of the general areas the condo fee covers.
Interior maintenance: Owners share the cost of maintaining common building areas like parking structures, laundry rooms, fitness centers, and hallways, as well as mechanical systems like heating, cooling, electric, gas, plumbing, and elevator maintenance.
Exterior maintenance: Owners also share the cost of exterior common areas like fences, gates, pools, landscaping, window cleaning, and seasonal expenses like snow removal.
Security: This could range from cameras in the parking garage to a staffed front desk monitoring people coming and going to full-time guards patrolling the grounds.
Utilities: Most condo fees cover utilities such as sewer and trash removal. Some buildings, typically older buildings, include gas, electricity, and water. Remember that the more utilities covered, the higher your condo fees and the fewer incentives owners have to be energy efficient.
Insurance: Most condo fees include a master insurance policy that covers the exterior structure and common areas. Condo owners only need to purchase insurance policies that cover the interior of their home and their possessions and provides liability coverage.
Reserve fund: There are expenses that don’t come up monthly, or even an annually, that need attending to, so a well-managed condo will put a portion of the condo fee each month into a reserve fund. This will typically be used for major capital improvement projects but it could be used for large, unexpected expenses that arise.
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