HOA fees are a drag, right?


It is all how you look at HOA fees.

What do HOA’s cover?

Many HOA’s cover insurance on the structure, management fees, reserves and common area maintenance. What does this mean to me? If you have a fully amenitized building, the HOA is paying for your cleaning fees of your hallways, maintenance of your pool and maintaining the other amenities onsite. Does your building have a 24/7 concierge? Your dues also cover the salaries to have this valuable amenity.

How does insurance work?

The HOA has a policy to cover the exterior of the building, therefore, you, as an owner, are responsible for the studs in? This means that you are paying more of a content policy that should run anywhere from $600-$800 for the year.

How much goes into the reserves? When purchasing into an HOA, it is always good to review the HOA reserves. Is there enough in the reserves, has there been a special assessment recently? If so, what did it cover? Special Assessments are more commonly required these days as insurance policies have increased and buildings have aged and require updating. 

If you have a special assessment from an insurance claim, make sure to call your insurance company regarding a loss assessment policy. A loss assessment policy is A loss assessment is your share of a fee that may be charged against you for loss to property owned in common by the members of your condo or homeowners association. Many times you have a rider that will cover this amount. Make sure to speak with your insurance agent prior to purchasing. 

Also, urban properties typically have lower utility bills. The average electric buiss is surprisingly significantly less than a single family home. Also, with a state of the art thermostat, you can control your utilities with the touch of a finger. 

Cost Comparison

When looking at a HOA, put together a spreadsheet of the cost of the HOA per month vs. what you would actually pay for the same cost of maintaining a single family home and you will be surprised how the HOA is less than you would typically pay to maintain a house, yard, pool and pay for a gym membership. 

The hardest thing about joining an HOA is understanding what costs are involved. Sometimes you will see HOA’s from $700-$1,000/mo and this can be scary but understanding what is involved is the most important thing. 

Also, talk to the HOA that you are thinking about joining and see what capital projects they have coming up. Updating the common areas only makes your property more desirable and increases your value. The most misconceived notion about HOA fees is they are too high but if you analyze the cost, you will see that they are inline with typical expenses of owning real estate.