There’s usually a sizable difference in the purchase price of single family homes and condominiums of similar grade. Adjusting for differences in square footage and certain amenities, the required condo fees are usually higher than single family homeowner association (HOA) fees.
Could that difference in fees make up for the difference in purchase prices? How much more property could you buy if, instead of acquiring a property with a condo fee, you bought one without? Here’s one way to look at it.
I have a condo where the fee is over $300 per month. That includes trash service, water and electricity, as well as maintenance of common areas and all that good stuff. But let’s suppose I had instead bought a home nearby that didn’t have a homeowner association. How much more home would that $300 condo fee buy?
First, realistically it would be more like a $200 difference since I would have to pay for utilities and such any way. Assuming a 30 year mortgage and 5% annual interest, that extra $200 per month works out to a little more than $37,000 – an amount that will, unlike fee increases, appreciate in the owner’s favor.
In other words, if I had put that extra $200 per month toward buying a bigger property, I could have bought a home that cost about $37,000 more. Would that have been likely in that area? No. But that doesn’t mean that’s always the case.
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