Is buying a condo or townhouse with HOA's fee worth it

7 Replies

@Juliet Salceda

They can certainly be good investments. You'll typically have less expenses and less need for a capital reserve with a condo, or an HOA. There are usually large differences between the two.

That being said, before buying make sure you vet the condo association documents or the HOA documents. The association should be fiscally healthy and meet all Fannie Mae lending guidelines in order to keep steady values. A well run condo can be a great purchase.

What kind of HOA are we talking about? I own two townhouses in developments with HOAs, but those associations only cover common areas such as landscaping, parking spaces, etc. The townhouses are fee simple, and you own the structure & the land beneath the structure as opposed to only the "walls in". As a result, the HOA doesn't cover the physical structures of the townhouses themselves. In the two communities, my monthly HOA allowances run around $27-30. But as Mark said, the devil is in the details...check into the financial health and the covenants of the HOA you may potentially buy into to ensure you understand as much as you can.

I recommend learning more about HOAs and what to look for. I did a report last month about HOAs. Am I allowed to attach the report on here?

The financial health of the HOA is vital. You can be assessed the next day after you close and you have to pay it. The percent receivables is important along with the percent of units that are owner occupied for resale. If you want to flip or sell this condo and the buyers cannot get an FHA loan because too many units are not owner occupied or a large percentage of units are delinquent, it will make it harder to sell. Banks won't lend to a HOA with bad financials.

It depends... I have seen it represent a good value and not so much...

To simplify.... Think about it this way... You get to share expenses...

When you need a major improvement (like a roof or parking lot) you get to split the cost with like a hundred neighbors. You also share many common regular expenses from maintenance to insurance... Done right, this can get you economy of scale and some favorable pricing (i.e. less than what you'd paid to roof a single family home of comparable size).

The down side can be things like agency costs, poor management, and financial mis-steps.

The bottom line: what are you getting for the dues? Are the dues paying an idle managers salary or going to project over-runs.... and still not maintaining the place or building reserves (the bad side) or do the dues help a well run association thrive, are they accounted for in a transparent way with good reserves, funding an active maintenance program, solid reserves, and good owner involvement and professional management (good side)..

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