Hi Folks,

Looking at a condo that has a very attractive price point but the monthly fees are very high. Is it normal to pay a monthly reserves fee on top of the HOA? 910 a month on top of the mortgage would take a big bite out of cash flow as a rental.

Well maintained ocean front complex withnew elevators, large open parking lot. 24/7 on site property management, roaming security. Maint. fees.................$510.00 Reserves....................$340.00 SBA...........................$6.00 LTD CE reserve................$54.00 Total................$910.00 Monthly fees include: Air conditioning, cable, quarterly pest control, trash, hot water, sewer, water, on site property manager, roaming security,maintenance for two pools, beach area, BBQ area, Cabana, lobby, stairs, elevators, parking.

I can't comment what all of the cost elements of the condo. Sounds like it covers a whole lot, especially AC. As to reserve funds, they are good to have, and avoids the imposition of special assessments.

I lived in a condo once and the majority of owners are extremely cost conscious. They have roaming security and a night watchman, an extravagance, but other costs are kept to a barebone minimum. There are no reserve funds allocated. What happened? They often have to impose special assessments to pay the bills.

For instance, the condo owners consistently complained the utility fees are too high. They tried conserving but not enough. One month we have to pay a special assessment within 30 days or the electric and gas will be shut off. The board complained the condo owners are cheap and they have to wait to the last minute hoping electric and gas usage would drop.

When they imposed the emergency 30 day special assessment for the electric and gas shut off, I asked about reserve funds. The answer I got was people are all against it. 

It's attitudes like this that turned me off on condos.

Thanks Frank! This is in Kona, HI. It is the first one I have seen that charges a reserve. I had previously assumed that reserves were built into the HOA. More education needed!

@Barry L Hohstadt maybe this association has a history of underfunded reserves and has chosen to line-item the charges so that members would be absolutely sure that a certain portion of their fees were going towards the reserve. Whether it's $910/mo without any subdividing of costs, or $910/mo with the subdividing you've shown, it's still $910/mo.

Originally posted by @Barry L Hohstadt :

Thanks Frank! This is in Kona, HI. It is the first one I have seen that charges a reserve. I had previously assumed that reserves were built into the HOA. More education needed!

 Looks like the amount of the reserves, some $340.00 is a good amount of the total monthly fees. It's possible that they have some major projects coming up. BTW, how many units is the place?

For the HOA, is damn is you do and damn if you don't. I owned rental condos where the building had historic designation, and roof replacement cost over a million dollars. There's 104 units in the place, so it'll cost each owner $10,000 in special assessments. Not even reserve funds would help.

What it will cover is probably renovation of the public spaces, re-carpeting etc. Of course you have to make sure the HOA doesn't have too much money that they can waste. When my condo was threatened with utility shutoff, the HOA said the monthly reserve amount only came to $30.00. When they tried to make it bigger, everyone thought they're being scammed, I think because it's hidden in the monthly fee. If they break it out, people would be more comfortable.

Also, the rental condo that had to replace the historic roof did something I never heard of. I sold the condo and gave the new owner a few thousand off because of it. My sister who's a condo owner there said they got a million dollar mortgage. Told her coops get mortgages, but condos don't. The danger is if the mortgage defaults, the bank can foreclose on all the condos, which is why I don't invest in coops. Like you say, learned something new every day.

Thanks for the great  info. I am not sure how many units but it is a good size complex and a popular one as far as I can tell. It was built in 1969 so it may be due for some major renovation. I looked at a listing for a two bedroom in the same complex and the total monthly fees are 1672. Add that to the mortgage and it make no sense to purchase based on other properties that are available among other obvious reasons.