How HOA Fees Can Ruin Your Condo Investment

Condo living is a great option for small families, people who want to live in urban areas, or those who don’t want to worry about yard work. Many condominium complexes also offer their own amenities, such as swimming pools, gyms, clubhouses, and Internet service. Many real estate investors want to capitalize on the popularity of this type of property, but they need to make sure they have all the facts before buying a condo.

One of the many great things about a condo is affordability. Condo prices are typically significantly lower than those of townhouses and single-family homes. While single-family homes, townhomes, and condominiums have homeowners associations that handle communal property, condo owners typically pay more to their HOAs than owners of any other type of property. Single-family property owners can expect to pay up to $100 per month to their HOAs. Townhome owners typically pay between $100 and $300 per month. Condo owners typically pay between $100 and $700 per month, but it’s not uncommon for those rates to be higher.

The reason condo HOA fees are so much higher than other HOAs is that condo buildings give the HOA a lot more property to maintain. Condo owners really only own the property between the interior walls, floor, and ceiling. The rest must be paid by the HOA, which includes hallways, elevators, roofs, exteriors, and any additional services. If a real estate investor purchases a $240k condo for $1,600 per month, but his HOA fees are another $500 per month, that seriously hurts the real estate investor’s profits. Tenants won’t be happy paying itemized monthly HOA fees to maintain a property they don’t own, so investors should try to anticipate HOA fees and incorporate them into their monthly rent.

The other downside to HOA fees on condo buildings is that even when the mortgage is fully paid off, a substantial monthly payment is still required to live in that condo. Also, depending on the area, condominiums tend to appreciate in value much more slowly than townhouses and single-family homes. So while investing in condos may be a good idea in certain parts of the country, there’s a lot that goes into the cost of a condo besides the mortgage. Investors should know where they choose to invest in condos and do their homework, finding out as much as they can about condo complexes, relationships between HOA residents, and the frequency of HOA fee increases before making a purchase. . While it’s certainly not impossible to make a living investing in condos, it takes a bit more knowledge than traditional real estate investing.