Condominium fees have been one of the least understood components of the modern real estate era. There are numerous misconceptions regarding how fees are determined, where the money goes, and that condo living is more expensive than living in a single family or townhome. After more than 25 years of condominium sales and residency, I can assure you – it is not. In fact, in the long run, it is likely that you will spend more annually maintaining a single family home than paying for all of those condo fees. And the best part – not only is it less expensive, it allows you the freedom to do more (than just take care of your house).
Let’s look at the real cost of home ownership. Sure, there are items like mortgage payments and property taxes, but let’s look at what you will, or have been spending on single family or townhouse ownership annually. Remember, these numbers are based on averages. Print out a condo comparison PDF here to compare your actual monthly expenditures to perform a true “apples to apples” analysis.
We will start with the obvious – lawn care. On average, homeowners in the Baltimore area will spend approximately $50 per cut, twenty times per season. That’s $1,000 in annualized costs – or $83 per month. Now lets add on the additional cost of landscaping (pruning / replacing mulch / spring and fall cleanup) at another $1,000 – or $83 per month. How about snow removal in the winter? On average, Marylanders will spend $200 -$300 on snow removal (more if it is a bad winter). But even at this basic rate, that’s another $20 a month on average.
Second, let’s discuss homeowner’s insurance. In all of the condominium developments listed on the InnerHarborCondos.com website, the condominium master insurance policy covers the building, should any emergency arise. Condo owners are encouraged to carry an H06 insurance policy (for condos) which covers personal belongings. This is similar to having a rental policy and usually costs less than a few hundred dollars per year. If your home is worth $500,000, that means your monthly outlay for insurance is about $158. Since the condo structure is insured under the condo master insurance policy, your H06 policy will only cost you about $35 a month. That’s $123 a month more out of pocket each and every month.
Another fee commonly included in condo monthly dues is water. The average water bill in Baltimore City is now approaching $65 per month.
Lawncare, insurance, and municipal water charges are included in just about every condo in Baltimore – at least the larger complexes. These three items alone add up to nearly $375 per month in fees paid out of your pocket. They may not come out each and every month, but by December 31st, you are likely to have spent $4,500 for just one year of insurance, water and lawncare.
Now let’s take a look at a few items offered by many condominiums that are also included in the monthly fees. Cable TV is offered as part of many condo amenities. If cable is included, this could save you anywhere from $50-$100 per month depending on the package offered. Some complexes offer not only basic cable, but premium stations as well. A few condominiums offer gas heating and cooking. Typically, the gas utility is purchased in bulk by the condominium and included in the monthly fee. On average, BGE customers spend $93 per month for natural gas. Naturally, depending on your home, usage and lifestyle, this number can go up dramatically. How about electrical charges? Did you know that many downtown condos use water source heat pumps? That means that the supply to the furnace and air conditioner are provided by the condominium. Giant water heaters and chillers do the work of the condenser that may be sitting outside of your home. This alone could save an additional $100 a month over comparably sized non-condo residences. The typical utility bill for a one bedroom condo is $50-$100. Not much more for a two or three bedroom residence. Condos are typically insulated very well and have less heating and cooling loss compared to single family and even townhomes.
Have a security system? That’s another $20 a month in monitoring fees that are no longer needed. Many of the condos in Baltimore offer 24/7 front desk staff and security. Gym membership? That averages $60 per month per person in the Baltimore Metro area. Again .. many of these complexes offer 24/7 fitness centers. Some offer pools as well.
All totaled – another $300 per month may be leaving your pocket (or more) to pay for items included in your monthly condo fee.
What about commuting? Did you know that the average commute into Baltimore City is 8.6 miles? Many condo residents live downtown to be closer to work. At 25 miles per gallon (national average) – that’s a savings of about $35 per month per vehicle.
Do any of these monthly expenditures seem outrageous or possibly even noteworthy? No, but when added together, the above homeowner is spending about $700 per month to live in a single family home in the suburbs.
But wait … there is a WHOLE LOT MORE. We’ve only discussed the typical ongoing monthly expenditures. What about repairs? Ouch! Over the life of your homeownership, according to US News and World Reports – you will spend between 1% and 4% of your home’s value EACH YEAR on maintenance and repairs. This is for items like gutter cleaning, caulking, driveway repair, painting, siding repair, brick and mortar repair, pest control, and the big daddy – roofing! And this is just a brief list of what you could be paying for. If you have a well and septic – double ouch! So let’s use that $500,000 home example again. 1%-4% equates to between $5,000 and $20,000 per year just to maintain that beautiful home. That’s $417-$1,667 PER MONTH on average. How do these items get paid in a condo ownership scenario? They are budgeted in advance. Condo boards and management companies know that the typical life span of the building’s roof is “X years” and budget accordingly by placing funds in an account for future expenditures. Each capital item is reviewed and budgeted for a future repair or replacement. So what about unforeseen issues that arise? Reserve funds. Each and every month, condo associations collect a portion of the monthly fees that goes toward the association’s reserve funds. Each condo board has its own formula for determining the amount held in reserves, but it is not uncommon to have hundreds of thousands of dollars, even well over a million dollars in reserves, just for unforeseen emergencies. So the condo’s future expenditures are collected a little each month and held until needed. Are you currently budgeting for that new roof you may need, or the exterior painting, or the driveway repair? Probably not.
Now let’s add it all up. About $375 a month goes to the basic expenses you would be paying at any single family home – insurance, water, lawn care and snow removal. Possibly another $325 per month could be covering cable TV, security, gym membership, utility savings, etc – depending on what a specific condo complex offered. Then there is the WHOPPING $400-$1700 per month in repairs and reserves for future repairs. All together, that could be $1100-$2,400 per month as an apples to apples comparison on a $500,000 residence.
Still more? You bet …
These are just the direct financial benefits of condo living. But what about the real world benefits? What about the 24/7 front desk staff that collects your packages, mail and dry-cleaning? What is the monetary value of that? What about the game rooms and community centers? What about the ability to lock your door, ask the desk attendant to water your plants and leave for 6 months without having to worry about leaks / maintenance and security? What about all that time you just saved not having to deal with contractors and laborers? How much is your time really worth? Considering what you will spend on a single family home over the next 5-10 years – these ever so important lifestyle benefits are more like a bonus !!
One certainly can say that living in a condo can cost a lot … personally, I think NOT living in a condo can cost a whole lot more.