Prospective home owners sometimes use the subject of condo fees to justify their preference of a house over a condo. The argument is: “If I buy a house, I can save the condo fees.” This reasoning is not entirely accurate, since it assumes that house-ownership is completely without cost.
Water, Home Insurance, and Heating Costs
- Water: Virtually all condo fees already include water and hot water.
- Home insurance: Property is also going to be substantially more in a house, since the condo building is already insured, and the condo-buyer only has to purchase condo insurance.
- Heating costs for an apartment or townhouse style unit are also going to be substantially less than the heating costs for a stand-alone house in the $200K range.
(I point out the price range, since MOST 200K houses will likely have either old furnaces, old windows, poor insulation, etc.)
Emergency Fund
Home owners (especially buyers of older buildings) are well advised to start an emergency fund for things that go wrong. For example, a new roof ($5000), new furnace ($4000), hot-water tank ($800), windows and doors ($15,000) can put a real dent into your savings. So putting aside a small amount each month, the house-owner could save enough money to pay for those things. All the while, the condo-fees already include this savings fund: its called the Condo Reserve Fund.
So lets take a look at the various savings in the chart below.
In the first column, we have the costs of house-ownership. The middle column shows that some of those items are already included, while the rest are substantially lower. The column on the right hand side shows the actual savings enjoyed by the Condo-Owner.
$215 per month LESS for the Condo
So in this example, the operating costs of a condo are actually about $215 per month LESS than the house, if you include the ’emergency fund’ savings plan for the house. So now, take the $215 off the condo fee of $275, and the actual additional costs (over and above a house-ownership) are only $60 per month. For that money, the condo owner gets professional management, landscaping and snow-clearing, and often the use of amenities such as workout room, swimming pool, etc.
It’s about life-style
Condo ownership is about the life-style. If you travel a lot, or are too busy for yard work, or any number of other reasons, then condo-ownership may be for you. It should be pointed out that, even in a condo, it’s prudent to have some extra money set aside, in case the Reserve Fund is not large enough to tackle any major project or renovation. When that happens, the condo owner will face a ‘Special Assessment’, a sudden bill he will have to pay. But there again, thats really not much different from having to buy a new furnace or other major unexpected repair.
Condo Fees vs. Housing Expenses
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[00:00:00] Since houses don’t have condo fees there are always a better deal aren’t they. Well not so fast. Let’s take a look at the facts on this episode of Winnipeg’s real estate podcast. You’re listening to Winnipeg’s real estate podcast with Bo Kauffmann of Remax performance realty. We are answering questions for buyers and sellers of homes and condos in Winnipeg.
Hi this is Bo Kauffmann of Remax performance realty here in Winnipeg. I am your residential real estate expert working with home and condo buyers and sellers. The question I quite commonly get from somebody is looking to buy their maybe their first home. They say well why would I buy a condo thats got condo fees? Houses don’t have those fees so obviously house is a much better deal. A much better bargain than a condo.
Well not so fast. I mean there might be a number of reasons why you would not want to buy a condo. Perhaps it’s the wrong thing for the wrong lifestyle. Perhaps you like a yard there’s a number of reasons why condos won’t work for you but the condo fee itself is not necessarily the reason you should not buy one. Take a look at the imaginary 200000 dollar house and compare it to a condo of roughly the same value.
Let’s take a closer look
And let’s assume that that condo comes with a 275 dollar a month condo fee. So let’s take a look at some of the things that condo fee pays for that start for example with water. Almost all, I would say 99 percent of condos, the fee includes your water bill. [00:01:44][103.5]
[00:01:45] So you don’t have an added water bill whereas in a house you’ve got a water loan. You know your inside water, outside water. You’ve got to budget at least 60 to 70 dollars a month for your water bill. So that’s that’s already included in the condo fee heating bills.
Now in a lot of condos there are heating bill is also included but let’s say it’s not included in the 275 dollars. It’s not included but it’s a high rise condo it’s like an apartment style or even a townhouse style. I can tell you that the heating in those units is going to be significantly less than a standalone house.
Why is heating a condo less expensive?
And that’s the reason is you’re surrounded by other units. You’re protected from the elements by other units and the hallway units above you perhaps units below you. So your average heating bill is going to be well below 50 dollars. In a house you’ve probably got a budget for at least a hundred dollars. And I would suggest that if it’s a 200000 dollar house you’ll even have to budget for more than that.
Home insurance: if you buy a house you need home insurance. Property insurance is mandatory if you’re getting a mortgage. The bank will demand that you get property insurance so that that’ll cost you anywhere from 60 70 dollars 75 dollars a month minimum depending on how big the house is what part of the city it’s in. You’ve got a budget at least seventy five dollars a month whereas in a condo the building itself is already insured. It’s part of your condo fee. [00:03:10][85.2]
What do Condo Fees pay for?
[00:03:11] So instead of seventy five dollars a month you might be looking at 20 dollars a month for what’s called condo improvement or condo ownership insurance. So it significantly less. The other thing is if you’re buying a 200000 dollar a house I would strongly suggest that you start putting away money. For things like roof repair a leaky faucet window replacement door replacement.
Furnace breaks down hot water tank any number of things that can go wrong. You should start your own reserve fund and that’s already included in the condo fee. So that if the building needs a new roof they should have a reserve fund for that already so you wouldn’t have to pay extra for that. So in a condo you’ll probably have less expenses. Now that’s not to say that they wouldn’t have a special assessment coming up once in a while. That’s entirely possible. But for your average maintenance on the outside of the building that should be covered by the condo fee.
Condo fees don’t look so bad now
So add those up and all of the sudden the condo fee doesn’t look that bad anymore. Because it includes the water. It includes possibly part of the heating. It gives you cheaper home insurance. So the condo fee itself should not detract you from buying a condo. I firmly believe that the whole condo versus House debate revolves around lifestyle. If you’re traveling individual who likes to travel. Who doesn’t want to do yard work who leaves their home maybe two months of the year then a condo is definitely worth looking at. If you have somebody that’s got children and pets and you need a backyard and the condo is probably not for you. [00:04:53][102.3]
[00:04:54] But it’s best determined by having a meeting by sitting down and discussing your options. Like your budget and what you’re looking for as far as lifestyle goes. So if you’re looking to buy a house or a condo and when you pay you may call me anytime, at Remax performance realty area code 204 at 333-2202 [00:05:11][16.8]
[00:05:21] We hope you’ve enjoyed this episode of Winnipeg’s real estate podcast all episodes are available on iTunes and Stitcher when you’re ready to buy or sell a house or a condo in Winnipeg. Contact Bo Kauffmann at REMAX performance realty at 204-333-2202 or email [email protected] [00:05:34]
Also check out “Closing Costs When Buying A House Or Condo”
What is Winnipeg’s market, as far as Condo Sales and Listings are concerned? Check out monthly condo market update.
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How about the property tax?
Thank you for noticing. The reason I did not mention the tax is simply because the tax rate for houses is identical to the tax rate for condos, so there is no difference between equally valued properties.
You didn’t mention the property tax.
Thank you Lily. In Winnipeg, the property tax rate for houses is the same as for condos, so equally valued houses and condos, in the same or similar neighbourhoods, would incur the same taxes.
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