Sunday, July 19, 2009

How to Figure Out if Condo Fees are Appropriate for a Given Building.

When looking at a condo especially in Hoboken, you need to consider whether or not the condominium associations has strong 'financials'. What does this mean?

Does the building have appropriate maintenance dues to cover the cost it the associations annual budget? In any budget there are expenses that occur every month or every season, commonly referred to as normal operating expenses and then there are long term costs such as a new roof or new water main line. These expenses that occur every few years are typically called capital expenditures. When assessing whether or not an association is appropriately funded, you need to take into account whether or not it is appropriately saving for these longer term, 'every once in a while' expenses. The building should also just have some ready savings around for the unexpected e.g., a tree that falls on the building in a storm.

To figure out how much a condo has to pay in maintenance and to assess if it and the reserve amounts are enough to be considered in good standing, take the budget and divided by the total square footage of the units in total and then multiple by the square footage of the unit you are considering divided by 12 to get the monthly rate.

Look at the budget. Are they just allocating operating expenses are is there any estimate for upcoming capital expenses?

The amount of maintenance dues will vary with the building's amenity level. If there are employees dedicated to the building such as full time supers or concierge or if there is an elevator or other like a pool the operating budget will be higher per square foot. Elevators, pools and employees push the cost up significantly due to the need to bring in skilled maintenance people, insurance and employee benefit costs.

Another big factor to consider when evaluating the condition of the financials is the condition of the building. Has the building been kept up? Or are there many capital expenditures coming? A new roof for a 25 foot wide, 75 foot deep tenament building is in the $6-8K range. A new watermain can cost about $10K. Repointing the building is another expensive cost. Are the windows the responsibility of the individual owner or the association? So, it's important to know when these common element items were last updated. Your inspector will help you evaluate the effective age of these items and your real estate agent can help you with looking at the financials.

Hoboken real estate has a mix of old and new properties. When buying a unit in an older building, you should expect more maintenance projects. You should also expect that the condo association has been saving for them all along. Newer Hoboken real estate developments may have more services that push up the maintenance per square foot.