What Factors Affect Rising Town Home HOA Dues?

4 Replies

I'm looking to buy a town home, and my primary concern are HOA dues increasing over time. What factors affect the rising cost of town home HOA dues? The town home in question belongs to a community not fully developed (some lots are undeveloped and a few are undergoing construction) and the current HOA dues are $50 per month.

In what scenario will these dues increase in the short and long term? Will these dues increase if the other town homes in the neighborhood fail to sell? What happens to the town home when the unit attaches directly to it becomes seriously damaged?

I basically just want to know what my risks are for rising HOA dues on town homes. I suspect condo HOAs are much riskier. Any information that will help me understand my risks would be greatly appreciated. Thanks in advance!

You should be able to tell by looking at their financial documents. The HOA Expenses and how well they historically match their budgets are good data to start with. Read their declaration/by-laws and see what they are providing vs. what the owners pay.

Hi @Vince Rosario , I second what Chris Martin suggests, but can give you a little insight as well.

The HOA dues generally pay for the operation and maintenance of common areas - areas that are shared amongst all homeowners. I assume the townhouse in question shares a wall with two neighbors. The dues could be broken down into the following major categories:

  • repairs & maintenance (R&M)
    • structural maintenance (roofs that are shared, sometimes balconies)
    • repairs for any amenities 
  • grounds & roads
    • landscaping
    • repairing sidewalks and roads
  • utilities
    • clubhouse utilities
    • landscaping irrigation
    • parking lot or site lights
    • trash if there's a compactor or dumpster
  • insurance
    • property damage
    • general liability
  • management expenses
  • reserves for capital repairs (major repairs like roof replacements, seal coating roads)

New construction usually carries a 1 year warranty so any major defects will be repaired free of charge, sometimes it includes maintenance of equipment and sometimes it doesn't.  

If your HOA hires a professional manager, that could increase your dues. If the HOA sets up reserves for major repairs that could increase your dues - which could be as soon as the developer transitions management over to the HOA.

Hope this helps.

Great post above from @Beverly Rogers . Also, at least in my area, developers are notorious for slapping together barebones budgets that don't adequately cover all expenses that a property has in an effort to keep fees low until they can sell units. This leads to almost immediate spikes in fees and there is little recourse that owners have. This risk is much lower in an HOA because homeowners are typically responsible for far more items than in, say, a condo association. In an HOA (double check your docs to make sure), the homeowner will typically be responsible for the roof, HVAC, facade maintenance and repair, windows, doors, etc. The fewer items the association is responsible for, the lower your fees will be and the less chances of a major spike down the road due to unforeseen circumstances.

@Chris Martin , Beverly Rogers , @Marc M. ,

Thank you so much for the responses, they were VERY helpful. Having to conduct research on HOAs as part of my due diligence is completely new to me, and the agent I'm working with hasn't been much help at all in that regard. BP is a fantastic resource, many thanks! Anyone else, feel free to chime in.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you