Should I be suspicious of low HOA dues?

Question

Hi BP community. My wife and I are looking at a townhome in Denver's Five Points neighborhood. It's a 1913 building that developers bought and have redone all 11 units.

I've lived in condos most of my time here, and the HOA fees are usually between $200 and $400. The HOA for this townhome is $70, and the agent I'm working with wondered aloud whether the developers were starting the HOA low and wondered whether we would find that that $70 doesn't cover capital costs as they arise.

The big expenses for the HOA would be the roof and maybe paint for the exterior? (Each unit has its own furnace.) I called the agent. He said the roof "is not new but has been totally repaired." Not sure what that means. Anyway, does anyone have insight on this? Maybe I should figure out how old the roof is, figure the cost of that new roof and work backwards to see if our dues will build a reserve big enough to cover that cost when it will come due?

Thoughts?

Mindy Jensen · Answer

@James Carlson , my experience with condos has not been positive, marked by a special assessment every single one of the 5 years that I lived in a condo.

$70 will not cover anything. What are they saying it covers? If everyone pays the same amount, the association is bringing in $770 a month. You go back and forth saying condo and townhouse. Is it a row of homes connected, or is it a bunch of units with a common area?

The common areas will need to be cleaned, heated and lit. Who is taking care of landscaping, snow removal or any other exterior issue?

$770 doesn't go very far, you will see a special assessment anytime something needs repair.

James Carlson · Answer

No, no, we're looking to just buy one unit. (Somewhere between $389,000 and $425,000 depending on the unit). It's not a coop. It will have an HOA. I just don't see a history for one, and so I was trying to do some calculations myself to see if that advertised $70 HOA fee is high enough to cover whatever might come up in the future.

Account Closed · Answer

Is this a syndication or a you just buying 1 unit for for $409000? It does not appear to have a hoa in place but if they do your agent should have the proposed projections for the hoa part Or are you buying into a coop ?

Account Closed · Answer

Sit down with the community manager and discuss your concerns,also you should have a copy of the budget which would include reserves for capital improvements.the only concern is the size of your community

James Carlson · Answer

Hi Account Closed . Thanks for the response. I should have been more clear. There's no history of an HOA here, as far as I can tell. It was bought a year or two ago -- likely an apartment building at the time? -- and was totally renovated. So there's nothing to review really. I did track down an offering memorandum that they have out there for an investor to buy the whole renovated building to make into apartments. Anything in there that would help me out?

Jennifer Lee · Answer

There is a developer in our area that builds a community. They don't usually have any amenities. so the 80-90/mo is for landscaping and snow removal, common spaces. it doesn't cover anything else. They, the developer, are the HOA until they sell all the units, and then the community will take over.

the ones with high HOA 200-500/mo usually are townhouses, they cover roof, paint, pool, playground, even patios and decks. So you need to read the docs.

James Carlson · Answer

@Mindy Jensen. Thanks for your help. It's a townhouse. 11 units. All connected. No common area, no pool, nothing like that. I only mention condos to say that I have lived in condos, and I can see why their fees are higher. The condo I live in now has a few common areas, a pool, a gym and a roof garden ... all that need maintained. The place we're looking at is a townhome with none of that, so I assume the HOA dues will be less. It's just that $70 doesn't sound like much. Even if there's not much to be maintained.

Should I be suspicious of low HOA dues?

Should I be suspicious of low HOA dues?

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