Before we ever bought our condo and had a monthly association fee to pay, I was under the impression that I'd really dislike such a regular financial obligation. However, having been in this situation for over a year now, I'm finding our association fee surprisingly beneficial. While such fees can come in differing amounts depending upon location, number of units within the association, and what the fees are meant to cover, I've found that certain factors have come into play in helping us determine whether or not such a fee is worth the cost.
Breaking Down What the Fee Covers
Knowing what an association fee is for and how it will be applied to the various aspects of living in a home is an important part in deciding if it is indeed worthwhile. There are many components of living within a community that an association fee might apply to. Road maintenance, maintaining a community pool, tennis courts or clubhouse, grounds upkeep, repairs, snow removal, trash, water and sewer services, insurance, and a variety of other items could be covered by such a fee.
With our particular association fee, we get our water/sewer/trash services, our condominium's common insurance fee, common area utilities, lawn maintenance and snow removal, repairs to the exterior of the building and common areas paid, and the management company is paid from this fund as well. There is also a reserve fund that is maintained as well. We receive a regular budget that allows us to see how our money is being applied to such items.
By knowing what costs an association fee covers, it makes it easier to conduct a cost analysis to decide whether such a fee is indeed worthwhile. In our case, we can compare our current situation, and the cost involved -- a $300 a month association fee -- to the costs we were incurring in our previous single-family home to see if it pays off.
- Water/sewer/trash -- Association fee
- Repairs/maintenance -- Association fee
- Common insurance -- Association fee
TOTAL -- $300.00
Previous Single-family Home
- Water/sewer/trash -- $43.63/month
- Repairs/maintenance -- $166.19/month
- Insurance -- $40.00/month
TOTAL -- $249.82
So by doing this brief cost analysis, I can see that it was indeed cheaper to take on many of the aspects of home ownership myself in a single-family home; however, there is more to consider than just the regularly occurring costs that can be covered by an association fee.
Peace of Mind
An added value from an association fee that isn't always recognized in the near term is a reserve fund. In our case, our condo association currently maintains a reserve fund in excess of $200,000! In our previous single-family home, due to our short time there (just three years) we avoided major repairs and replacements such as a new roof for our home, replacing the HVAC system, window replacement, buying a new water heater, and replacing our aging appliances -- repairs that would easily have reached into the tens of thousands of dollars.
With our association fee fund and reserve, some such repairs (not interior ones of course) will be covered, adding further value to such a fund's existence not only financially but through added peace of mind as well.
Possible Resale Value
A further potential positive of an association fee can be its attractiveness from a resale standpoint. It can be viewed as a sort of convenience by many who don't particularly like budgeting for a litany of home maintenance items themselves. Add to this, one feature that we found attractive when putting the offer on our current home was the significant reserve fund. Knowing that we wouldn't be walking into a special assessment of some sort and that any large repair on the building would potentially be covered by this fund added peace of mind to our purchase.
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The author is not a licensed financial or real estate professional. The information provided in this article is for informational purposes only and does not constitute legal, financial or real estate advice. Any action taken by the reader due to the information provided in this article is solely at the reader's discretion.