costs in buying / owning a condo?

Asked by may, Santa Ana, CA Wed Aug 6, 2008

I am from Australia, and would like to know what are the costs associated with buying (and owning) a condo or townhouse in the US (eg Orange county, CA).

I have read about HOA dues (home owners associations?) - Are these fees payable monthly and what do they cover? In Australia, we have body corporate levies which are payable quarterly and they cover cleaning of common properties (like underground carpark), building insurance, strata management fees (for someone to do the administration / book records of the body corporate), water (if there is no individual meters), electricity (for common areas only), repairs and maintenance to common properties etc.

Also, I have read about property taxes in the US. Do property owners in the US pay property taxes for condos? Who actually own the land in the condos? In Australia, each owner owns the space (or strata) and there is a land tax payable if the property is rented (or leased).

Are there any other costs I should be aware of?

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may, , Santa Ana, CA
Wed Aug 6, 2008
Thank you, everyone, for your quick answers! Appreciate the comprehensive replies - all good and helpful comments. Thank you for explaining the property taxes in CA.

In Australia, the body corporate levies have 2 components: one for administration which covers operational expenses; and one called "sinking funds" which builds up funds for future repairs & maintenance (such as external painting or major repairs - like replacing the roller door of an underground carpark). When we look to buy an apartment (or condo), we check out the levies and see how much there is in the sinking fund account (particularly for old buildings). So, the US and Australian systems are very similar.

Monique: It is interesting that you mentioned avoiding condos with pending litigation. I saw some nice ones going for very cheap because there is a court case between the condo owners and the land owners over the fees (the website said currently $200 a month and could go to $2,000 a month!)
1 vote
Monique & Joe…, Agent, Beverly Hills, CA
Wed Aug 6, 2008
Hello May,

HOA dues are paid monthly. Typically they run anywhere from 150 per month to 1000 per month for luxury buildings with valet for example. They usually include common area maintenance, earth quake insurance (sometimes), utilities for common areas, water, cleaning, management .Buildings usually like to have some reserves set aside. Typically 6 months of HOA fees per unit is considered good. If there aren't enough reserves than an assesment will have to be made to each unit to cover major improvements. HOA are generall paid monthly. Property taxes in California at about 1.1.5-1.25& of the sales price (unlike other states this is fairly low) and do not change unless there is a change in ownership or you make substantial improvements which generate a building permit. Owner's of condos pay property taxes just like homes. It sounds like the corporate levies is Australia are simiar to the monthly HOA fees charged in the states. Also, with a condo you do not own the land, you own airspace. In townhouses which have land some times you own a fraction of the total lot. The tax is payable whether is is leased or you live in the property.

As far as any other costs you should be aware of, read the HOA CC&Rs very carefully. Insure that their are adequate reserves for the building and no pending litigation or assessments for major work and if they are you might want to request a credit on the purchase.


Monique Carrabba
The Reavis Group
Keller Williams
1 vote
Kevin Keyser, Agent, West Hollywood, CA
Wed Aug 6, 2008
Hi May,
Costs include HOA dues, which are due on a monthly basis. What they cover varies depending on the unit you buy. Some homeowners dues cover many things including water, gas, cable or satellite TV, earthquake insurance (some associations have it, while some choose not to) etc... while others do not cover all of these things. This is really on a case by case basis. Most HOA dues cover maintenance of the common areas, gardening, etc. If any work is needed, like new plumbing or a new roof for the building, a special assessment could be ordered as mentioned below.

Many lenders will also require you to have property insurance in order to get your loan. Most HOA's have their own liability insurance but many lenders will still require you to get insurance to cover your unit, in case there is a fire, flooding, etc.

Condo owners in the united states do pay property taxes, which are due twice each year and vary by area, but a good rule of thumb is about 1.2% or more of the purchase price.

Good luck with your purchase! Prices must look great to you right now!
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Jonathan Tay…, , Orange County, CA
Thu Sep 11, 2008
No worries mate. It's $180-250 average on HOA monthly payments/dues. We want to ask for at least 7-10K back for closing costs. when you are purchasing a condo market is buyers today as you know so this is not usually a problem except on REO's
Property owners of Condos pay their own Property tax (sorry I don't think there should be property tax).
See website below for more info and related videos etc
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may, , Santa Ana, CA
Wed Aug 6, 2008
Thank you, Dave, for the additional comments on all the fees and costs, and good suggestions about knowing before buying the necessary information and costs.
0 votes
Dave Osborne, Agent, Orange, CA
Wed Aug 6, 2008
Yes. At a minimum, even for condos, figure 1.1% - 1.2% for property tax. Ask your Realtor about the difference between Fee and Leased Land units. You don't want any surprises. HOAs can charge assessments for repairs and upkeep above and beyond the regular monthly HOA dues. Read through all the HOA documentation, including the minutes from the last meetings to make sure there are no surprises.

Also, you are correct about what HOA dues cover. Sometimes water, sometimes not, sometime Earthquake Insurance, sometimes not. It is always case by case so read through and be comfortable before you remove your contingencies.

A typical condo cost breakdown could be as follows: Purchase Price $325,000 with 20% down at 6.5% = $1645 p/m. Monthly HOA at around $300 p/m typically covers common area maint. and exterior. Property tax would be right around $3,600 a year ($300 p/m). Personal Property insurance should be under $100 per month. Total would be about $2345 per month.

Just 2 big cautions. Read through all the HOA documentation (consider sitting on the board) and don't hesitate to ask your Realtor for an Estimated Buyer's Cost or something similar. Also make sure your mortgage broker provides you a HUD 1 or good faith estimate for the costs associated with the financing. Even though they are estimates, they will give you a good idea of what to expect.

It can be overwhelming but as long as you are armed with good, solid information upfront, you will find it is very workable.
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Sj209, Both Buyer And Seller, California
Wed Aug 6, 2008
Good questions. In general, the situation is very similar to Australia and the HOA fees cover the same services. You must pay property tax. Costs to be aware of are special assessments, school bonds and improvements. It is not uncommon for an HOA to levy a $2k/unit bill for plumbing improvements/repair, for example. A lot depends on the building.
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