Costs to Consider with Condo Ownership
So, you’re thinking of buying your first condo?
It’s safe to say that this is reason enough to celebrate! Condo ownership provides buyers with the opportunity to purchase property when freehold home ownership is not yet possible. This allows for a unique chance to get “into” the market at a potentially lower price tag.
But, there are factors to be considered if you’re going to delve into condo ownership.
So, before you purchase your first condo, you’re going to want to acquaint yourself with the associated costs. Of course, purchasing a condo is often a less expensive alternative to a house. However, it’s also important to note that condo ownership does carry a few added costs. While the initial price tag may draw you in at first, it’s absolutely essential to acquaint yourself with these additional costs.
There’s a Reason Everyone Loves Condos
There’s good reason that condo ownership is so popular today. After all, a condo offers the opportunity to own a piece of property often situated in an urban environment. It also provides residents with attractive services and amenities such as a concierge, security, event spaces, spas and fitness rooms.
This allows for the chance to live in a well-maintained environment without the need to maintain it yourself. It’s easy to see how and why this appeals to so many people today.
A Savvy Investment
The costs associated with condo ownership do not mean that a condo isn’t a great investment. In fact, the general price of condos in hot markets such as Toronto have been increasing at higher rates than detached houses in comparable areas.
This is because so many buyers find themselves being priced out of freehold homes. When priced out of the detached market, it’s only natural for more people to redirect their search to condos. As a result, there’s more competition in the condo market and sale prices begin to increase.
Sure, the cost of the condo itself might be under $500K. But, you’re also going to want to factor in just how much the maintenance fees are for that unit. This way you can determine the cost of your monthly mortgage and taxes as well as your maintenance fees.
In some parts of Ontario, maintenance fees can be incredibly high despite a low purchase price. In fact, downtown Toronto condos can see maintenance fees as high as $1 per square foot. This may be rare in a more generalized market, but it’s not uncommon for hot properties.
It’s also important to consider that while some condos benefit from high-end amenities such as valet parking and 24-hour security, these amenities increase the cost of your maintenance fees. For buyers looking to keep their monthly costs low, a no frills building with minimal amenities is likely the best option.
Consider that while you may be willing to pay a premium for your maintenance fees, future buyers may not. In general, buildings that carry high maintenance fees are notoriously challenging to sell. This is important when it comes to the resale value of your condo.
Each month, a portion of your maintenance fees will go toward your condo’s reserve fund. This is a shared fund amongst owners that is reserved for costs such as major repairs and renovations. This fund is managed by your condo corporation and carefully examined to ensure that it maintains a healthy balance.
Before you purchase a condo, your lawyer will examine the reserve fund to ensure that it contains adequate funds. This will help to protect you against issues in the future that are related to your condo’s reserve fund.
A special assessment takes place when a condo corporation requires more money than is available in the reserve fund.
Let’s say that your condo is nearing thirty years old and now requires a new roof.
Unfortunately, the reserve fund has been poorly managed and there’s not enough money in the fund to cover the cost of the new roof. When this happens, a special assessment takes place. This means that the remaining balance due is divided amongst residents and must be paid accordingly.
In reality, special assessments are rare. This is because the condo corporation of a condo building is typically organized enough to prevent this from happening. If an unexpected cost presents itself, there’s usually enough money in the reserve fund to cover this cost.
In Moving Forward…
In most cases, a condo is going to be a solid investment.. But, in order to ensure that you’re prepared for everything that comes alongside condo ownership, it’s essential to know the associated costs upfront. In having an understanding of these fees, you can better prepare a safe and responsible budget for yourself.
Begin your search for a condo here!