Reflections on Condo Ownership: 6 Years In

Rightsizing your space for your needs is so important. We have worried we didn’t have quite enough off and on. Without plans to have children, however, a large two bedroom apartment is really a great size. It’s forced us to change our packrat mindsets and get rid of stuff we don’t need, which is great.

In 2017, this condo cost just shy of $15,000 in housing expenses (mortgage interest but not principal, condo fees including special assessments, property taxes, condo insurance, electricity, and repairs). Despite minimal income from me in 2017, our housing expenses are still quite low compared to our income for the year. That’s the pro side of buying a reasonably priced place when your income is lower. We are currently budgeting about $2,000/month for our 10 year mortgage payment, condo fees, property taxes, and condo insurance, which includes a parking spot, in-unit laundry and a storage unit and sees about $800/month going to principal of the mortgage payment. For a similar rental apartment nearby, we would pay at least $3,000/month before even getting a parking spot. Purchasing this condo when I did was an incredible financial decision and has substantially influenced the wealth that we now have.

Although we didn’t meet my original five year payoff plan, we have made substantial progress on the mortgage over the years. The balance has dropped by $30,715.48 since I last made an extra payment in December 2014. We have now paid off 60.7% of the original mortgage. We refinanced to a 10 year amortization, which means we have at most 10 years left on this mortgage. We have a new plan to pay it off within 5 years from now and should see the balance drop to five figures sometime in early 2019. We also have enough in cash to pay off the current mortgage balance due to our cash holding preferences.

When you’re buying a condo, you read through so many documents. You get access to condo association meeting minutes for the last while, budgets, and nest egg (this is not the technical term, but the technical term seems to vary regionally) information. You do due diligence then. You have to keep doing that due diligence even after you’ve bought. Every year, you should get a budget, updated fee schedule, and nest egg information. You need to ask questions.

People complain about condo fees being “high”. Take a look at what your condo fees cover. Condo associations do need to pay for items that you don’t have to pay for when you own a house, such as filing a tax return and other fees, licenses and permits related to being a non-profit association, management fees, ridiculous costs of photocopying and postage, regular studies on the building’s nest egg, elevators, fire systems, and a phone line for the callbox. Never buy a house with an elevator – they’re expensive as all hell. The condo budget also covers building insurance (why our condo owners policy is so cheap), water, sewer, garbage, cable TV, cleaning of the common areas, outdoor landscaping, roof maintenance, plenty of plumbing, electrical, and repairs of many structures including windows. Those fees aren’t a waste of money, though they surely feel high when it’s one single chunk coming out each month instead of small dribbles.

I remember when I was looking at condos, everyone talked about how special assessments are bad, without much discussion of why they are bad or how they happen. In my experience, they happen when the people running the board don’t plan for the future, but also, when unexpected events arise. Our condo building is now older and needs a fair amount of work done in the next several years. The board in the past had chosen to never save money for future maintenance issues and to only raise money from homeowners each year for the maintenance that they planned to do that year. That turns into a problem when you need to replace the elevator, windows, roof, decks,and siding all at the same time, to the tune of a five figure amount per homeowner (about $25,000 at the maximum).

Thanks to some turnover, this year, the board in our building chose to raise our monthly condo fees by a bit more than 50% to start saving money for the future. They also did a small special assessment (< $1,000 for our portion), though presumably a larger one will be coming in 2019 or 2020 as we still have a low five figure amount to pay according to the last nest egg analysis.

The money part is a smaller portion of the issue to us – coming up with a low five figure sum to pay the special assessment when we've been spending so little on housing the last several years isn't a huge deal. The more frustrating part to us is realizing how much maintenance has been deferred (roof, elevator, windows, siding, as well as ongoing pipe issues – basically all of the major projects), how out of the loop homeowners not on the board have been kept, how little control we have over the general maintenance level of the building, and how much random power the board thinks they have. I spent 2017 on the Board, which increased our knowledge of what was going on, bringing with it, the stress of how chaotic the board was and how no one on the board really agreed with each other other than that all maintenance should be future owners' problems and not current owners' problems. The Board has, on multiple occasions, done work that affected our unit without notifying us or shown up at our door without notice to do work, both of which are against the actual policies the building has.

Well, that future is now. The maintenance is the current owners' problems because it needs to be taken care of.

All of this led us to open houses of small-ish single family homes. You can't, however, find a single family house as centrally located as we are. And then instead of being frustrated with the condo board not doing the maintenance, we would need to take care of it all. A house is a substantial lifestyle change from our current situation. A house that meets all of the requirements we laid out would end up moving us to a new neighborhood, increasing commutes, not necessarily come with a garage, be further from lovely walking trails, and its purchase price would be somewhat more than what we estimate we could sell the condo for at the moment. All to avoid being in a condo association. Is that worth it?

So in the end, which compromises do we want to make about our housing situation?

For now, we concluded that we should work on improving our cash position over the next few years to get ourselves in a position that we could buy without selling stocks, if we wanted to. The financial plan that I drew shows that we could save a 20-30% down payment on our ideal house's price over the next two years, depending on how much we choose to invest and how much income I add to the pot. Our current idea is to invest 1/3 of our available money for savings and save the other 2/3 for a house, which we can adjust depending on how we are feeling as the plan goes along. We'll also likely stick to our new five year mortgage payoff plan as a hedge of staying, it has a small impact on our overall cash flow, and we would roll any condo equity into a house.

Would I have still bought this place if I went back in time? Probably. I would have done more research into state law on condos though and more due diligence each year.

Readers, how have you decided to move in the past?

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10 thoughts on “Reflections on Condo Ownership: 6 Years In

  1. I have always thought I would rather rent than own if I had to be in a condo association. I just hate the idea of having liabilities that I had minimal control over. I could probably handle a townhouse because there are fewer shared expenses since they don’t tend to share roofs or internal plumbing. In our HOA we have fees that have gone from around $250 to $300/year, so far no special assessments, and our shared expenses cover a pool, clubhouse, tennis courts, and fences (also I think things like the annual Easter egg hunt). Even with fences the cost isn’t scary once divided up among all homeowners.

    We’ve also avoided living in homes with shared ceilings/floors ever since we left graduate school. I was not a fan of all of the noises associated with apartment living and would pay a premium to just not have to deal with that again.

    Location is really important– there are a lot of tradeoffs that may or may not be worth making. Good luck with your search and your decision making!

    • There are definitely pros and cons to renting versus owning an apartment. We really like the stability of owning over renting. We wouldn’t want to rent a condo, knowing how much HOAs seem to hate renters. Also, we’ve had friends who’ve done that and they’ve pretty regularly had to move when the owner decided to sell their unit. The nice thing about owning is that we have been able to make little changes like light switches, programmable thermostats, toilet seats, ceiling fans, and closet organizers that we wouldn’t likely be able to make renting. Those have some value too. Honestly, I think the main boon of owning over renting for the last six years has been how much the condo has appreciated and the fact that you get to keep all of the appreciation (ignoring capital gains) despite having a mortgage. If we sold the condo and invested all of the equity, it would take an 8% return on investment for the investment on that capital to cover our renting expenses, which is interesting.

      That’s a good point about townhouses not sharing internal plumbing. The ones here vary a lot, but some do share roofs, technically. Some share underground garages too. The internal plumbing sharing here has definitely been a frustration as it is older and you can be severely impacted by what your neighbors put down their drains. We haven’t had too much noise problems and honestly, staying in the city, we’d have similar problems in a house/townhouse. I also really like that we have no street facing windows in our condo, which would be very difficult to get in a house in the city!

      Location is SO important – that seems to be the part leading us to not moving!

      • With renting an apartment you don’t get control but you also don’t get the liabilities. With owning a house you get liabilities but you also get control. Owning a condo– liabilities without control. I would hate that.

        • That’s fair. The lack of control is definitely what is bugging us lately. Even if all of the systems in the condo association failed in one year, the most our unit would need to pay for a special assessment is $20,000. That’s reasonably minimal liability in my opinion, compared to the current value of the condo (mid to high six figures). The control, however, has become a bit obnoxious. The board entered our unit without our permission recently (BLEURGH) and won’t fix some window issues because it requires replacing the siding and that is “expensive”. All condos nearby are having similar issues lately, so it’s not like we could just trade buildings. It’s a complicated decision.

  2. I could never buy a condo or any place with HOA fees. Too many rules. Too little control over what your money goes to. You can’t opt-out of expenses you don’t want or opt into things you DO want.

    My parents moved into a condo a few years ago. This year my mother joined the condo board. That lasted all of, oh, about three months. There was so much fighting over what to do with the money and shady stuff going on, she just quit. I can imagine that most HOAs are just poorly run.

    • I spent 2017 on the board and promptly quit at the end of my term. Things were a train wreck, really poorly run, and everyone was vouching for what the previous president had been doing despite it being contrary to our state law.

      My husband and I try to not talk about the condo issues too much except to each other. Many people aren’t condo people and their solution to us is to buy a house because that’s what they would do. But we don’t want to move neighborhoods so our options are to stay here or to rent a similar apartment nearby for probably about $3500/month. Neither option is really ideal.

  3. All living situations have pros and cons. I’ve never really thought through the pros/cons for condos, because we were hoping to have kids relatively soon and wanted to get a 3BR house if possible (or a 2BR house if we were priced out). So, we didn’t really consider condos at all.

    Thanks for sharing your experience! It does make sense that most HOAs are probably poorly run. I also think many households are somewhat poorly run, as in homeowners also defer maintenance and don’t always maintain proper reserves for future projects! Lack of planning is surprisingly common. But at leas it is something you can control as an individual household!

    • The thing I find fascinating about living situation pros and cons is that even with the same list, two different sets of people could make a different decision.

      I don’t know about all states, but our state has been substantially changing laws recently I think to help get HOAs better run because it’s becoming a serious problem with older buildings. I agree that a lot of houses are likely similarly poorly run. Maintenance and planning simply is expensive and time consuming. The new builds near us are all from tear downs, which only come from poorly maintained houses – if they were well maintained, they likely wouldn’t have been torn down! But yup, it’s something you can control as an individual household.

  4. Wow, I didn’t know about special assessments or that they can be so high! That really scares me. I just moved into my condo 2 years ago, and there haven’t been any unexpected expenses like that, but my agent told me it’s because it’s a relatively new condo so they still have a good stockpile of money. When I look at their expense reports though, they mostly spend on stuff I don’t use – like the clubhouse, the pool, the tennis courts. I should try to take advantage of that.

    I definitely appreciate the HOA taking care of all the maintenance. What I don’t like our lack of recycling bins (is that even legal?). When I bought it up to the manager, she told me to bring it up to the board. But who has time to go? I should though… in the meantime, I’ve been collecting our own bottles and actually getting that 5cents back (mostly out of conscience though, not for the money).

    • I don’t know about your state law around condo associations, but my state requires them to do a Reserve Study and the results need to be provided to homeowners with the budget for the next year. Have you seen those reports? Does part of your dues go towards building a reserve fund?

      I was really annoyed when I joined the board and discovered that we had been paying for a compost bin to be picked up weekly that was hiding in a storage room and no one was using!

      You really should go to the board meetings! That’s the only way you can gain transparency on what’s going on!

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