3 Surprising Costs You Could Incur After Buying a Condo
Don't end up with costs you can't afford just because you weren't expecting them.
- You'll need to pay more than just a mortgage when you buy a condo.
- Some of the costs you could incur may surprise you, such as association fees.
Buying a condo could be a good option if you want to own property of your own but you don't want to buy a single family home. Condos can come with less maintenance work because you have an association to manage common areas. And they often, but not always, cost less to purchase than single family homes do.
But it's important to make sure you understand all of the surprise costs you could incur, as the expenses associated with condo ownership may go beyond your mortgage payment. In fact, here are three unexpected costs that you might face after purchasing a condo.
1. High condo association fees
Condos have associations that manage common areas. You'll have to pay association fees to those who are in charge of taking care of the building amenities, including the lobby, patios, swimming pools, elevators, and outside landscaping. In some cases, fees can cover common utilities as well, such as garbage pickup for the condo unit.
These association fees can sometimes total several hundred, or even several thousand, dollars per month. You need to make certain you know up front exactly what the association fees will add up to so you aren't faced with a monthly or annual fee that's outside of your price range.
2. Special assessments
Condo associations should have reserve funds that they use to make major repairs or cover emergency expenses. But sometimes these funds run dry, or a huge expense is incurred by the association because something big goes wrong at the building.
If the association needs more money than the regular dues and emergency reserves can provide, it can sometimes levy a special assessment. This can be quite expensive and is an irregular expense that it is difficult to plan for, so you'll want to have your own emergency fund set aside when purchasing a condo in case you're faced with this unexpected expense.
3. Extra insurance if you live in a flood or storm prone area
The condo association provides insurance for the common areas of the building and the building's exterior. But that doesn't mean that condo owners don't need to worry about insuring their own individual units.
In fact, having condo insurance is crucial for owners to protect their possessions, as well as themselves from liability in case someone gets hurt in their unit. Without insurance, a condo owner could end up having to pay out-of-pocket to replace everything in their unit, from the cabinets and plumbing fixtures to their furniture, clothing, and electronics.
Most people cannot afford to replace everything they own and rebuild their interior unit without financial help, so condo insurance is a must-buy. But for condo owners who live in areas where flooding or severe storms are likely, insurance premiums may cost more than expected. This is especially true if someone needs to buy special flood insurance, as most standard home and condo policies exclude flood damage.
It's best to get insurance quotes before purchasing a particular condo to get an idea of what the costs of coverage will add up to and to ensure they are within budget.
Getting hit with any of these surprise expenses could cause problems with your budget, but planning for them in advance can help condo owners ensure they don't end up with financial trouble.
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