What do HOA fees cover? More than you think.
What do homeowners association fees cover?
I’ve made no secret that I love condos. With real estate in most urban locations becoming more and more expensive over time, condos can be one of the most accessible and easy ways for people to get on the property ladder. As long as you ask the right questions before you buy a condo, they can be a really great way to enjoy painless home ownership in the city. And, they can be great investments as well, as I have seen with my own condo in Seattle.
But, whenever I tell someone I own a condo the FIRST THING they say is “Oh no, I am so sorry! You have to pay all of those homeowners association fees!”. I will admit, I don’t enjoy paying my HOA every month, but I do think people have the wrong attitude about HOA fees. Although they are an expense, they usually pay for a number of important things that you would ordinarily have to take care of yourself with a SFH or a townhouse.
For the visually inclined, I will start off with a chart going over the USUAL items that homeowners associations fees do and do not cover. I’ll dig into each of these down below.
| Item | Condo | Townhouse | Single Family |
|---|---|---|---|
| Inside maintenance | Owner | Owner | Owner |
| Outside maintenance | HOA | Owner | Owner |
| Common area upkeep | HOA | Owner | N/A |
| Capital replacements | HOA | Owner | N/A |
| Power/sewer/garbage | Varies | Owner | Owner |
| TV/Cable/Internet | Varies | Owner | Owner |
| Amenities (pool, etc) | HOA | Owner | Owner |
One note of caution
The statements I am making here are assuming that the HOA fund for a given condo is fully funded and prepared for the maintenance and capital replacements that will eventually come around. If not, condo owners could be subject to something called a “special assessment” when big things like a roof or siding need to be replaced. Make sure to do your research and ask the right questions before buying a condo so you can avoid this.
Inside maintenance
No matter whether you own a house, a townhouse or a single family home, inside maintenance is going to be the responsibility of the owner. Even though a lot of maintenance is taken care of by the HOA in a condo, you will still have to take care of the floors, paint, appliances and other upkeep within your unit.
Outside maintenance
Some of the largest expenses that homeowners face are the costs of maintaining the exterior of their home. The elements can be incredibly tough on homes, and over time the costs of maintaining the paint, siding, roof and deck can amount to tens or even hundreds of thousands of dollars.
The same is true for condos, except usually this exterior maintenance is entirely taken care of by the Homeowners Association. Although it stinks to pay the HOA fee every month, a large chunk of it is going into the reserve fund to help pay for the replacement and maintenance of these features.
Common area upkeep
Townhomes and condominiums generally have some amount of common space that is shared between all of the owners. This could be anything from a hallway inside the building to a parking lot, garden, or amenity like a pool or exercise room. In a townhouse, these types of things are the responsibility of the owners to share between themselves (if they do not have an HOA). In a condo, the HOA will generally pay for them.
Capital replacements
Condos, and particularly larger condos, may have additional elements that single family homes and townhomes don’t, like an elevator or laundry room, for example. In the case of a condo, when these items need to be replacement the HOA will generally take care of them out of the reserve fund.
In my condo, the association recently paid nearly $200k for the replacement of the elevator. It was a significant cost, and I didn’t have to pay anything out of pocket. However, having an elevator is a big cost for the building and it is something you don’t have to worry about with other types of home. Running, maintaining and replacing the elevator in my building probably costs me $25-50 a month in HOA fees. It’s not a cost I am happy with, but it is part of owning a condo in a larger building. If you find a condo in a smaller, walk up building you can avoid this cost altogether!
Power/sewer/garbage
Many homeowners associations will pay for power, sewer or garbage, which is a significant savings that people often overlook when buying a condo. Keep in mind, this is on a building by building basis so there is no way to be sure a condo HOA will pay for these things unless you ask or see it within the association documents. Generally, it is more common for garbage and sewer to be handled out of the HOA and power to be paid by the individual condo owner.
TV/cable/internet
It may surprise you, but HOA’s will often cover or heavily discount TV/cable or internet, particularly in larger buildings. If the HOA can get a group discount that covers the entire building, often the owners will decide to join together within the HOA to purchase these items as a group. Again, this is not the case for all or even most condos, but it is true in some cases.
Amenities
Many condos have significant and meaningful amenities that can be of benefit to the owner. For instance, a condo may have a pool, game room, common area or rooftop, garden, exercise room, laundry room or any number of other potential amenities. One of my friends have a bowling alley in their condo. Admittedly, these amenities will often lead to higher HOA fees, but you cannot deny that a pool sounds nice on a Summer day!
Are HOA fees worth it? In my opinion, you bet.
It’s definitely annoying to pay HOA fees, but you cannot deny that they offer significant advantages and value to people who would rather have someone else take care of their maintenance for them. With a condo, you pretty much only have to worry about your interior maintenance (along with whatever utilities the HOA doesn’t cover). Although you need to make sure the capital reserves are funded so future capital expenditures can be dealt with, HOAs can make your life as a homeowner much easier.
