Condo Fees vs. Home Ownership

[Lizthevw]

When I used to work as a building engineer, I did a lot of reserve fund studies for condominium corporations. Condo fees tend to be artificially low during the early years of a condo, and will continue to rise as a building becomes less and less financially viable. In one building I was involved with, a 1970's condo building was cheaper to knock down and rebuild then to continue maintaining.

In general, the taller the tower, the more expensive to maintain, for a variety of reasons, including use of cranes and that water is driven into the structure at ever increasing pressures (the pressure curve for wind is not linear as height increases, but exponential).

I've crunched a lot of numbers, and I never find the condo fees to be a reasonable compromise. Knowing that they will only get worst has always kept me out of condos.

 

[lead82]

I think it really depends on the condo board and how well they are able to save money for a reserve fund. I know someone living in a 1970's building, which is 34 floors and has lower maintenance fees than many other buildings because their board did not spend money foolishly on contractors for every small repair in the building but rather hired a super that had the skills to do this and paid him slightly more. They've been able to keep their fees pretty stable if not flat for the last 5 years because of good investments with money in reserve ($2M+ invested in solid paying GIC's give good returns). Thus, I think it is all a matter of management and what percent of the building are owners vs tenants. The more owners the lower the condo fees and the better a building is maintained.

As others stated, you have less control in a condo, but you can find out about how good the management is and the financials from the status certificated before buying and you are also able to find out % of owners vs tenants. It all should impact ones decision to buy into a building.

Something that people haven't mentioned as a cost of home ownership vs condo is the cost of a 2nd car. Most people don't own homes next to subway lines or good public transit. Living on a cul-de-sac requires a family to own a second car to get around, or sometimes even a third once kids get older. Thus, adding those costs into the mix will make home ownership even more expensive due to the increased transportation costs. Most condos or high-rise buildings in general are build near TTC bus/tram routes or subway lines, reducing the need for more than 1 car, which can cost around $5-8K per year.

 

[Corinne05]

Can someone explain what is usually covered by condo fees?

I am trying to compare the cost of a condo vs. a house, and the range of condo fees seems huge on mls.ca, so I'd like to confirm what is included in most condo fees.

Thanks for any info.

A condo fee is most essential to any building. It obviously covers all the utilities or expenses incurred by the house. This method is used to free people from Paying bills separately. I believe it’s a money and time saving plan.

 

[PinkLucy]

It doesn't necessarily cover all utilities and expenses. For examples, property tax is paid separately from the condo fee. Also, some buildings include things like cable, some don't. Hydro may also be paid over and above the condo fees. Condo fees also include each unit's share of building expenses -- for example, the cost of running the gym or maintaining the pool -- things that each owner may or may not use. And there is an amount assessed that goes to the reserve fund for future expenses.

 

[Hawk]

Condo fes are not the only cost

I read throw this thread and I found a couple of missing issues.

Special Assessments
At any time, a condo owner can be hit with a special assessment which can run a couple hundred to a few thousand dollars. Once special assessments start, they can come in waves.

Status Certificates
They do not always tell the truth. In my building the management company claims about 20% renters when teh true figure is about 50% and getter higher as people cannot sell their units.

They also play games with how much is in the reserve fund. Our status certificates say how much was there on a specific month but it does not say that money may have been drained out of it since then. Our fund went down as low as $10,000 and that number was hidden from the owners.

Hidden loans
Another trick is to hide the fact that the condo has taken out loans against future condo fees or reserve fund money by calling it a code word rather than loan.

Property Management
The bad ones work for their interest not the owners. You need to know the "street reputation" of the property management company.

The list goes on and on. You can find out a lot about condo fees and other financial issues at condos at:

http://www.westmountcondoslife.com/contents5.html

Personally, after getting burnt badly in my present building, I would be very careful about buying a condo. Do your homework.

 

[NikoS]

I realize this thread hasn't been replied too but I thought I would post as I am currently looking to buy a unit that I really really like but the condo fees are higher than the new construction around. The buildings is older, has only 12 units and no amenities. The special assessment was just done. The condo fees are about 0.71/sqft and include all utils. I don't know how to evaluate whether the fees are reasonable or not. Any suggestions?

 

[Eug]

I realize this thread hasn't been replied too but I thought I would post as I am currently looking to buy a unit that I really really like but the condo fees are higher than the new construction around. The buildings is older, has only 12 units and no amenities. The special assessment was just done. The condo fees are about 0.71/sqft and include all utils. I don't know how to evaluate whether the fees are reasonable or not. Any suggestions?

Go have a look at comparable existing buildings (not pre-builds) with comparable amenities.

The problem with pre-builds is that the condos fees are artificially low, always. For all you know, they could double within 5 years.

 

[cdr108]

Go have a look at comparable existing buildings (not pre-builds) with comparable amenities.

The problem with pre-builds is that the condos fees are artificially low, always. For all you know, they could double within 5 years.

ditto !

another issue that dramatically affects the maintenance fees with the unit you're looking at is the small number of units - only 12.

vastly different from many new builds that have 100, 200, 300+ units to spread the costs over.

 

[NikoS]

I guess that the trade off... I like the small number of units, but you have to pay for it somehow. Is there a big difference between property management companies? Does there performance impact the fees?

 

[dt_toronto_geek]

I guess that the trade off... I like the small number of units, but you have to pay for it somehow. Is there a big difference between property management companies? Does there performance impact the fees?

The larger the building the more hours are needed for a Property Management firm (Property Manager or Administrator) to be on site, a smaller building would require fewer hours and would likely only be budgeted for fewer hours onsite. A poor or inept Property Management firm is probably cheaper, but the potential for things to get missed (maintenance issues, supervise/train staff etc.) increases exponentially so you'll pay for it in the end, not to mention the effect a poorly run building could have on the value of your property. A good Board of Directors will oversee how the firm is doing and deal with them or put them out when their contract expires if they are not performing satisfactorily.

 

[Eug]

I don't think smaller number of units necessarily means higher fees either. A lot of very big places add more amenities (eg. a pool or rental units for overnight stays) that you may not use but will pay for. My mom is in London in a detached townhouse condo complex. (They're all detached homes, but they pay condo fees.)

The place is small enough that the condo corp works with contractors directly. There is no management corp intermediary, which reduces costs. In fact, with the really small and inconsequential jobs, eg. removing a small dead bush and planting a new one, one of the semi-retired condo board members just grabs a shovel and does it himself.

P.S. I really like my mom's setup. I think the place is 1800 sq. ft. (including walk-out basement) and it has a double car garage. It's detached but considered a townhouse (as all the houses in the complex look nearly identical), and they pay condo fees that covers the usual stuff that would be covered in Toronto townhouse condo complexes. The complex is in a nice neighbourhood too, and on its own cresent so it's very quiet. It's the best of both worlds.

 

[dt_toronto_geek]

I don't think smaller number of units necessarily means higher fees either. A lot of very big places add more amenities (eg. a pool or rental units for overnight stays) that you may not use but will pay for. My mom is in London in a detached townhouse condo complex. (They're all detached homes, but they pay condo fees.)

Fair point, it really depends on how the Board and the residents want the building to be run, how dedicated they are and the amenities/services that need to be maintained. My last place had 96 units with a Property Administrator 15 hours a week, a Property Manager onsite 5 hours a week, mainly to do inspections and a security guard 24/7. The building was (and still is) very well run thanks to good management and a dedicated BoD. A friend of mine lives in a 72 unit building a few blocks away that is run by the Board, very much as you describe above. Strangely, maintenance fees in my friend's building are nearly double than where I used to live. There is no security guard, though the building is about 15 years older and both have few amenities to speak of. Between the two buildings they have for a sauna, hot tub, a gym (barely), party room and guest suite.

 

[marsh]

I live in a small condo complex - approximately 30 units - no amenties. It is true with smaller complexes you have less units to spread the fees over but then as has been pointed out, there are less amenities so it evens out some what and less building to manage. I also think with a smaller complex, the condo owners feel much more connected with the management of the complex and take a more active role in taking care of the building. Ultimately it comes down to a question of lifestyle and what you want. With respect to condos, what is critical is that you have compentent, engaged board that hires a good management company. So I wouldn't rule out condos over home ownership just because of condo fees.

 

[Groperty]

Condo's are definitely the way to go with regards to fees. No matter which you invest in (house or condo) you will need to pay for maintenance. The problem with a house is the fact that you will probably be doing repairs yourself (seeing as most blue collar call-outs are not reasonable at all). As you are most likely not a professional you will make some mistakes which will increase costs in terms of product used and time wasted. Condos usually charge a flat fee calculated by the size (per square foot) of the suite you own. It might seem pricey to pay $0.50 per square foot per month, but this means that everything is always in a good working condition...pool is always clean, garden looks great and you can enjoy the in-house amenities.

What did you decide to invest in???

 

[James]

I live in a small condo complex - approximately 30 units - no amenties. It is true with smaller complexes you have less units to spread the fees over but then as has been pointed out, there are less amenities so it evens out some what and less building to manage. I also think with a smaller complex, the condo owners feel much more connected with the management of the complex and take a more active role in taking care of the building. Ultimately it comes down to a question of lifestyle and what you want. With respect to condos, what is critical is that you have compentent, engaged board that hires a good management company. So I wouldn't rule out condos over home ownership just because of condo fees.

It is a double-edged sword with the smaller condo complexes as individuals with no building management or financial background are not necessarily the best candidates to manage a property. I've seen it first-hand. On the plus side, from my experience, the smaller boutique condos generally have a very high ownership-to-renter ratio. While it's great that the individual condo owners are very involved and share & voice their concerns, if the collective group agree that certain items should be prioritized in the budget, the majority will win, whether or not it is the optimal use of the budget. For example, in theory, it would be great to add more flowers to the lobby or artwork in the hallways or re-paint the common areas, etc. however the major building items which aren't as aesthetic (like roofing maintenance, eavestroughs, HVAC upgrades, foundation repair, etc.) will often get overlooked. IMO, these are the items that eat up more of a condo's budget that should be reviewed, scrutinized and discussed moreso than what type of welcome rug you want in the front lobby. At the end of the day, as marsh also points out above, you need to have a competent board to ensure all the important items are addressed.