The condominium market has imploded over the past year or two thanks to a downturn in the overall housing market and overbuilding in many local markets. Complete condo projects remain unfinished in Miami with some nearby completed units half empty due to foreclosure and/or a failure to sell.
Bad news for one person could be good news for another one, particularly for the investor who wants to snap a bargain while the market remains depressed. But, condo living isn’t for everyone and when condo fees are included, that bargain can quickly yield some nasty surprises.
Unlike most other residential housing options, condo costs are difficult to predict long term. Certainly, both the house owner and the condo dweller must pay property taxes, insurance, and similar expenses, but there are other costs which tend to go up much faster than the rate of inflation, expenses which are added to condo fees.
Let’s take a look at the charges which drive condo fees:
Age of Building — Newer projects don’t have quite the overhead of older buildings, namely the need to update or overhaul old equipment, repair fascia, replace flooring, paint walls, you name it. Your particular unit may have been updated, but the common areas may need a refreshing or, worse, a complete makeover. You’ll be responsible for a portion of these costs which are frequently added to monthly condo fees.
Utilities — Everyone is paying more for gas, electricity, and water. Condo owners are responsible for their share of the building’s utility usage and these rates have gone up dramatically over the past few years. Add in garbage removal, recycling, landscaping, sewer, and related expenses too.
Insurance — You have insurance on your own unit, but the association governing your building has to insure the entire property. Condos close to the ocean or in major cities have seen their rates skyrocket. These costs, of course, are passed on in the form of higher condo fees.
Of course, buying a condo may be the only option for people who have to live in a particular area. If you are planning to buy, examine the financial documents closely before you sign. Learn how much reserves the condo association has on hand to cover planned maintenance including a new roof, elevator, pool, etc.
If the funds are insufficient, you can expect your condo fees to increase dramatically even before maintenance is needed. That $225 monthly condo fee could suddenly jump up to $350 or $400 per month, a figure that must be added to your own mortgage costs, insurance, and property taxes.
Most defintely, if you are planning to buy a condominium, condo fees are going up and, in most cases, at a rate much faster than inflation. Think before you buy!
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