What your HOA dues pay for, as well as the amount, can vary tremendously. In a luxury building where there are a plethora of amenities, the dues will be higher but the amenities will be greater.
One thing that is helpful to understand is the difference between an operating expense and a capital reserve. HOA dues will always include the operating expenses for the building, while some will also include a payment into a capital reserve so that the money is set aside for the future. For a simple example, in a larger building, it could cost $36,000 for a roof which you have to replace every 10 years, so the HOA dues would include $3600 each year ($300 per month) so that the money will be there in 10 years, and each unit’s dues would include their pro rata share of that $300. This money would be kept by the HOA in an escrow account until the work is required. If the HOA dues do not include payment into a capital reserve fund, when something needs to be done like painting of the building or replacing the roof, all of the owners are assessed for their share of the cost when it is done.
Another possible difference in HOA dues is what operating expenses are included. For example, at one recent listing of a top floor two bedroom condo in the Mission, the dues were $473 a month and went toward standard items like common electricity, gas, garbage, water, insurance, maintenance, a management fee and payment into the reserve fund. I’ve also seen smaller 2 or 3 unit buildings that have HOA dues of $200 but there are no amenities for these condos and the dues pay only for the most basic costs and there is no reserve fund payment.
In contrast, at the Beacon, a luxury condo building, my client’s beautiful Bay view one bedroom condo has monthly dues of $762.77. But, you get a lot for these dues, including a 24 hour doorman, concierge service, a lap pool, spa, fitness center, business center, club house and dog park, all beyond payment for the standard items discussed above. For the busy professional buyer who needs his or her life simplified and likes having a concierge to accept dry cleaning delivery, a gym to work out at or a heated pool in which to take a dip, it is worth it to pay these higher dues.
While some people balk at HOA fees, remember that if you own a home, you have to pay for many of these standard items, just not on a monthly basis. And with a condo, you are sharing these expenses, unlike with a home where you are paying for all of the expenses by yourself.
