A condominium can be a great option for homeowners who want a low-maintenance property that may include some amenities.
Condos are usually single units in a large building or complex that are individually owned, but connected by jointly-owned common areas, like hallways, parking lots, and sidewalks that form a community. Each condo owner pays condo fees to maintain these communal areas.
If you’re thinking about purchasing a condo, it helps to start the process knowing the basics of how condo fees work and how they stack up with your other living expenses.
What Are Condo Fees?
Each condo owner is required to pay fees (in addition to mortgage payments and property taxes) to their community’s condominium association or homeowner’s association (HOA) to take care of everything related to building maintenance and repairs.
Essentially, condo owners choose to pay additional fees so that they don’t have to worry about the upkeep of their property or the surrounding common areas (like shoveling snow or mowing the lawn) or deal with larger repairs for the building (like repairing an elevator or the roof).
What is Included in Condo Fees?
Since you’re already paying property taxes and a mortgage, you’ll probably want to know exactly what’s included in your condo fees to budget accordingly.
What’s covered in your condo fees can vary widely depending on the building the condo is in and what amenities the condo owners have access to.
Generally, condo fees include basic things like:
- Building and common area maintenance such as lawn care, snow removal, road and parking lot repairs, and upkeep of common areas
- Waste removal for the building
- Pest control, including regular inspections and treatments
- Insurance for the building itself and the surrounding property
In some cases, condo fees can also include all or part of the cost of utilities (i.e. water and gas, but not electricity) and operational costs for amenities like gyms or swimming pools.
Reserve funds are also sometimes part of condo fees. This money is saved as a sort of emergency fund in case major repairs to the building, common areas, or amenities need to be made.
Condo associations that have reserve funds avoid having to demand that condo owners pay large sums of money for emergency repairs. If the reserve fund can’t cover the cost of the repair, then, generally, each condo owner is still responsible for covering the difference.
Before you purchase a condo, it is important that you understand exactly where your condo fees are going and how they are going to be used. The HOA for your condo community should be able to give you a clear breakdown of the costs, as well as explain what happens if major repairs to the building or common areas are needed. You might want to discuss with the HOA or whomever you’re purchasing the unit from if the calculation of condo fees could be included in your Real Estate Purchase Agreement.
How are Condo Fees Calculated?
Since each condo community is different, you’ll want to consider everything that the building has to offer, and then determine if the condo fees you need to pay match your expectations and budget.
In general, condo fees are calculated based on the percentage of ownership that you have of the overall condo property. The calculation to determine how much of the overall condo property you own generally includes the square footage of your unit, plus any outside storage or parking space that belongs to you. The amount you pay (either monthly or annually) is calculated from the estimated yearly operating budget that is set by the condo community’s HOA.
In other words, if the estimated yearly budget for your condo is $100,000 and you own 5% of the overall condo property, then your condo fees will be $5,000 per year or about $417 per month
Additionally, if the property includes shared amenities like a gym, pool, or tennis court that you have access to, you’ll need to pay a portion for these collective spaces as well.
It’s important to keep in mind that your HOA may have other fees that you need to include in your monthly or yearly payment (like a reserve fund) so be sure to include these in your calculations if necessary.
Purchasing a Condo
When deciding whether to purchase a condo, you’ll need to weigh the pros and cons of having to pay monthly or yearly condo fees. The most important thing is to find a building that is managed by a good HOA that is transparent with outlining how they calculate their condo fees, and how the money is used.
Would you purchase a condo? Let us know in the comments!