HOA Dues – What they include and how they compare with costs of owning a house

Condominium Association Homeowner dues (HOA dues) get a bad rap. Especially when they exceed $1,000/month (like in some Intrawest condo complexes in Mammoth!). Those are some crazy numbers, but not all of the dues are frivolous and they should not make buyers turn up their noses at condominiums and search exclusively for single family homes.

Often times, when buyers learn that you cannot currently rent out most single family homes on a nightly basis in Mammoth Lakes (a topic for another blog), most buyers reluctantly turn back toward condos and educate themselves about HOA dues.

Many buyers are surprised to find that a good portion of HOA dues are costs you would incur anyway if you were to own a single family house. So let’s take a look at the ‘Apples to Apples’ costs and then uncover which fees are more like ‘Apples to Oranges.’
Both Tara and Dennis own single family homes and rental condos in Mammoth, so we looked at data from both types of properties.

The condo complex where I own a rental condo is fairly average for Mammoth;

  • 84 units total built in the mid-late 70’s.
  • Amenities include a pool, two spas, a sauna, laundry room, landscaping and a lounge/reading room. It does not have covered parking, an elevator or common area storage facilities.
  • The HOA dues I pay for a studio+loft/2-bath unit are $420/mo.
  • The annual expenses in 2011 (a big snow year) for the complex were $321,273.

My house is also fairly average; 4 bedrooms, 3.5 bathrooms, 2-car garage. approx 2484 sqft and built in 1992.

Apples to Apples costs:

Snow Removal: Condo complexes plow snow from the parking lots and also remove snow from walkways. At the complex where I own a rental condo, snow removal in 2011 was $31,635, or 9.8% of the annual budget, or $377/unit/yr. (I will boil down all condo costs to this $/unit/yr in order to compare with my costs associated with my house.)

Most single family residence (SFR) homeowners have a contract with a snow removal service for approx $900/winter. (Incidentally, the alternative to a winter-long contract is to pay on a per-plow basis at around $45/plow.) Many other owners, including me, remove snow themselves with a snowblower. My cost is limited to snowblower maintenance, fuel, and my time. For this exercise, let’s call it $30/yr.

Water: Most (93%) condo complexes include water and sewer fees in their dues. My condo complex spent $32,130 in one year ($382/unit/yr).

You obviously also need water/sewer at a SFR. My bills average about $600/yr; less in winter, more in summer because I have a lawn to water. If your SFR has less grass, then your water bills should be less.

Trash: $150/unit/yr for the condo vs. $214/yr for the SFR. I take my trash to the dump to save some money; fees would be $456/yr if you order curbside pick-up service.

Insurance: As a condo owner, you will share the cost for an insurance policy on the buildings and common area. Most owners carry a separate, smaller, policy to cover furnishings and maybe liability coverage if their condo is on a rental program. As a single family homeowner, you will also have insurance for the building and the contents. Condo: $314/unit/yr for common area insurance + $336 for our individual condo policy = $650/yr. House: $1,254/yr.

Landscaping: Complexes will pay landscapers to get the grounds ready each spring for grass and/or flowers and keep them beautiful during the summer (mow, weed, trim, etc). In the fall, they will blow out the sprinklers and put down the necessary winterizing fertilizer. If you own a home instead, you may choose to have the native landscape look…Manzanita bushes, pine trees, aspens, rabbit brush, sage brush, rocks, etc. But if you have grass or want the wildflowers not to look so wild, you will incur some costs here. Condo: $43/yr, house: $406/yr (not including my labor).

Summary for Apples to Apples: Adding up the costs above, I spent $1,602 for these categories for the condo and $2,504 for the house.

Apples to Oranges:

And here are the parts of HOA dues that may not necessarily translate to costs incurred when owning a house or are hard to compare:

Common Area Utilities: My condo complex uses propane to heat the pool and spas and electricity to light the complex and run the office. Comes out to $599/unit/yr. I cannot determine what portion of my SFR utilities go to exterior lighting and to heating our spa.

Reserves: Condos usually hold funds in reserves for capital improvement projects. A portion of the monthly HOA dues go directly toward the reserve funds. Projects usually include re-paving the driveway, re-roofing, or re-doing the siding. Ideally, if you own a home, you should have a savings plan to be ready to buy a new roof after its useful life is up. In a homeowners association, you may not be directly benefiting from every reserve dollar that you spend, as you may not own the condo in 25 years when the balconies need to be re-done. However, the owners before you have been pitching in for a while, so you are benefiting from their dues.

In 2011, the condo complex collected $825,808 in normal HOA dues + special assessments. 38% was allocated toward the operating fund, 1.5% to a contingency fund, 50% to the current special assessment for building rehab and 10% to the replacement fund (reserves). My cost: $1033/yr for the condo, $0 for my house (though I should set aside some money to paint my house this year or next).

Special Assessment: When reserves are not high enough to pay for a needed project, special assessment can occur and can be costly. Different complexes have different philosophies; some have low HOA dues and then charge special assessments for many projects; others charge higher dues and then pay for the projects fully out of the reserve funds.

Maintenance: Asphalt, Buildings, Landscaping, Pool/Spa, Tools and Equipment, Vehicle Expenses (i.e. the truck that the manager uses to transport materials/tools, etc). Condo complex: $464/unit/yr. SFR: approx. $2,000/yr.

Management: Larger condo complexes (like the one where I own) hire an on-site manager to live and manage the grounds. They are always sweeping pine needles, tearing off ice dams, cleaning the pools, etc. They also enter the unoccupied units every so often to make sure windows are closed, lights are off and no pipes are leaking. Smaller complexes hire a manager to come by a few times per week to walk the grounds and do maintenance. This is the largest line item in our condo complex budget at $102,564 (44% of total): $1,221/unit/yr.

Absentee Homeowner Service: Some 2nd homeowners opt to hire a similar service, like www.AbsenteeHomeowners.com to make sure pipes do not burst during a cold snap or to turn up the heat before an owner’s arrival and to perform ad hoc projects. Prices vary on service provided. My cost: $0/yr.

Other: Accounting Services, Board Meeting expenses, Legal Services, Office Supplies, Office Telephone. Condo complex: $318/unit/yr. Most homeowners do not incur extra accounting fees or hold board meetings to discuss the operation of their house! So these fees would be considered extra for owning a condo, but the benefits are for an organization that is supposedly looking out for the best interest of the property overall.

Summary for Apples to Oranges:

Adding up the costs above, I spent $3,635 for these categories for the condo and $2,000 for the house.

Final Thoughts:
Overall, it would appear that the purchasing power of an 84-unit association saves money on the apples-to-apples costs of a condo vs. a home. However, the apples-to-oranges costs are hard to compare and do include extra costs that you would not incur if you owned a home, but comparing a condo and a home is not like comparing apples to apples to begin with.

When evaluating condos and their HOA fees, be sure to account for some of the differences in dues. Some condos have different amenities than others (some may only have a spa whereas others with have multiple spas, swimming pool, tennis courts, recreation rooms, etc.) And some complex’ HOA fees include cable TV, internet and, in some cases, propane.

HOA dues seem to always go up and never down (i.e. to keep up with inflation). And you may not have much control over them unless you are influential on the board of homeowners. But they do pay for some costs that you would incur with owning a house and do provide owners and renters with amenities that you might not have at your house.

And you may be wondering just where on earth you can see $1,000/mo HOA dues? Well, Intrawest built some places where the HOA pays to heat extra common areas (like garages and walkways) with propane, which is currently pretty expensive. The larger floorplans at Cabins at Crooked Pines, Solstice, Eagle Run and The Village all have dues in excess of $1,000/month, however they do include propane and hot water costs so essentially a good portion of your heating bill is covered in the HOA fees.

If you have specific questions about HOA dues or real estate in Mammoth Lakes, CA, please contact Dennis or Tara or visit our website, www.MammothRealtySearch.com.