When looking to buy a condo, most buyers focus too much on the cost of the condo. While this is important as you can’t afford to spend more than what you can afford on a condo, buyers often neglect associated expenses that accompany the condo complex. In most expenses these associate expenses accompany you for life, or at least however long you plan to hold the condo complex. A condo is accompanied by great lifestyle choices and contain amenities such as gym, swimming pool, guest suites, visitors lobby, designated parking lots and round the clock maintenance staff. Naturally all this is going come with a cost, which is known as the condo fee.
This is a lifelong commitment that buyers must factor in before making an investment in a condo property. It is essential that condo fees are added to the monthly mortgage deductions to arrive at the total monthly commitment. Of course provisions should be made for renovations/repairs that may arise from time to time.
Here is your complete guide to condo fees and how it matters when you are looking to buy your condo.
What is the condo fee?
Most people buy a condo for the amenities and the facilities that are a part of the condo complex. It is not often that one realizes that these facilities need to be maintained for life. So how are they maintained? Residents of the building contribute a non-negotiable fixed monthly amount that goes towards maintenance of the complex. This is known as the condo fees. Obviously the amount contributed by each resident would wildly vary based on the size of their condo and also on the estimated budget for the condo complex for that year.
For example a family living in a larger unit would contribute more than someone in a single bed unit in the same condo. Similarly the operational budget of the condo complex can vary year by year. There can be increases due to inflation, or change in service charges or upsizing amenities. In some cases, there can also be reduction in the budget if the management is able to successfully negotiate a cheaper deal on something like swimming pool maintenance or gym instructor. So, take into consideration the condo fee when you are making a budget for your monthly expenses directly arising from owning the condo.
So what will the condo fee cover?
Typically the condo fees should cover all aspects of your building maintenance including common areas and amenities. It is needless to say that more the amenities in your building, the more the condo fees will be. Modern day condo complexes feature a range of amenities like gyms, swimming pools, activity rooms, a private theatre and a guest suites etc. Naturally there is a cost involved in maintaining these amenities and the majority of your condo fees will go towards maintaining these amenities.
Also common areas like hallways, lobby, parking lots and terraces will also have to be maintained. This will also be included as a part of the condo fees. Typically these areas will require attention in the form of vacuuming and cleaning. Utilities will also be covered under the condo fees. Most buildings feature a central heating system and elevators which all need to be paid for. The condo fees will also contribute towards this.
Finally a portion of the condo fees collected from all residents will go towards creating a reserve fund. In case of any breakdown or repairs or general maintenance to be performed in the building or to one of its amenities, funds from this pool will be utilized. This is a much better way of managing funds as you don’t want your association to come up and collect your contribution towards these repairs with just some limited notice.
In a reserve, a small amount of money is always kept aside and the fund is built over long periods of time. However, there will be situation in which condo residents will be asked to contribute funds in addition to what is already left in the reserve fund. This will mostly be in extraneous situations like major repairs or rebuilding a facility.
So how does the condo fee affect you?
First and foremost, you must consider your financial position when opting to move to a condo. Apart from your monthly mortgage deductions there will be an imposition of the monthly condo fees that you must contribute compulsorily to the complex. Other homeowners in the building will not take to it lightly if you didn’t contribute to the maintenance but just made use of the facilities. So make sure that this is well within your budget.
Second, consider the need to pay a condo fees. Look for a condo with large number of amenities only if you and your family will be using all of these amenities. If not you will be a wasting a lot of money on something you don’t need or use.
Next up analyse the condo fees. The condo fees must be compared to similar condos in the neighbourhood or area. It must be taken into consideration that an “apple to apple” comparison must be made with the fee. The comparative condo must also have similar amenities and facilities in order for the comparison to make sense. From the analysis you can figure if the fee being charged is on the higher side or lower.
If the fee is higher, you can question the condo manager or the resident association as to why the fees are higher. You can proceed only if you are satisfied with their answer. If the fee is lower, this necessarily isn’t a good thing. Lower fee would mean poorer maintenance and this is something that you would want to avoid. Alternately, the low condo fee could also be a result of the resident association stepping in a deciding against hiring a manager or management team and take on the responsibility of managing the property themselves. This could save a lot of money, which could lead to lower condo fees.
And finally, when you are totally satisfied with all aspects of the condo in question – property, amenities, neighborhood, location and of course the condo fees, only then you should think about seriously buying it. In case, some of these entities seem too outlandish to you and you aren’t able to make heads or tails about them, then you should definitely hire a well-established and experienced realtor who will explain you about the various overheads associated with owning a condo and also point out the best deal for you based on your budget and preferences.