Buying into a condo, strata, co-op, or homeowners association means you are accepting certain changes to your lifestyle. Since these communities have a different social setting, you will have to ensure that the lifestyle suits you. Apart from social commitment, you will also have to consider cost before you start investing into a condo, strata, co-op, or HOA.
When buying a condo, you’ll have to consider different costs. These include down payment, mortgage, property tax as well as monthly condo fees or special assessment fees. You will have to ensure that you are checking all these costs before you buy your new home.
Condo fees consists of a monthly maintenance fee charged to cover cost of landscaping, amenities, certain utilities, and repairs. If a condo offers additional amenities such as a gym or a swimming pool, it will charge higher fees. Condo complexes offering the basic facilities will usually have nominal fees. Similarly, if the condo unit owners have separate metering they have to pay their own utility bills. In case of townhouses, they will pay a lower monthly fee but will have additional utility bills. Usually, 35 to 45 per cent of condo fees is used for paying utilities. Another part of condominium fee will go towards paying insurance for the building.
Charges associated with condominiums also involve security fee. The condo association will pay security guards as well as purchase security equipment such as monitoring cameras. With most condo complexes, 24/7 monitoring is part of a basic services that is included in your monthly fee. Usually, 15% of monthly fee goes in the security funds to ensure that the building always stays safe for residents.
Condo, strata, co-op, or HOA fees will also include contribution into a contingency or reserve fund, which is required by law. These funds are used in case of emergencies or during major renovations, like replacement of a roof or plumbing. Your reserve fund study will outline the time frames for each of these renovations, to keep your property in a good condition.
Some condo associations may not have any funds set aside for emergency repairs. If you’re buying a condo in this situation, you may have to pay special assessment fee during any emergencies. Most condo managers will never reveal this hidden fee until you buy the condo. Therefore, it is important that you investigate into it and ensure that the association has a healthy reserve fund.
The monthly fees can vary with different complexes since each association has its own services and costs associated with it. Similarly, condo fees will depend on the location of a condo as well. A condo near a beach will have different costs as compared to a condo in the middle of a busy city.
Condo fee will most likely change from year to year. With expenses for development and additional amenities rising, condo associations will raise the fees to cover all expenses. On the other hand, if annual predictions show that the costs will go down, condo association will keep the fees low for the coming year.
These fees will also change with the size of your condo. For example, a two bedroom condo will have a higher fee compared to a studio condo. These fees are usually calculate based on your square footage or unit factors.
The monthly strata, co-op, HOA, or condo fee is unlike rent, as it's a source of profit for the association/corporation. The corporation/association is a non-profit organization and the fees are used to run the organization.
When buying a condo, it is important that you consider its monthly fees. Most people buying a condo for the first time ignore this very important fee. They only look at the ownership cost and forget to calculate monthly expenses that will rise with a condo lifestyle. Since the condo fee has to be paid in perpetuity, it is important that you get complete details before a purchase.
Before you move into your new condo, you will be told about condo fees. However, you should not stop at that, and ask for itemized disclosure to know where your money will be spent. You should also ask the association about any special assessment fees.
In order to determine what condo fees you may have to pay, you need to know whether the condo association has kept the building in good shape or not. If the condo management has kept the building in good shape, there would be minimal repairs and therefore the fees shouldn't be too drastic.
You will also have to know about the future plans of the condo association. Some condo communities will be looking to build additional amenities such as a pool or a gym at the time you buy your condo. If this is the case, you may have to pay an additional fee to help the association raise the funds. On the other hand, if you’re opting for a condo that already has all the necessary amenities, you will only have to pay for repairs.
Before you buy a condo and estimate the value you’re going to get with it, you need to check out reputation of the association. Sometimes, certain associations have a reputation for starting unnecessary projects and therefore charging additional fees for them every other month. If you want to keep your monthly expense to a minimum, avoid buying a condo where association don't have a good reputation.