When shopping for a home or investment property, you may consider whether or not it’s worth it to buy a condo. On one hand, condos are often less expensive in terms of the amount of space you get for your money, however HOA dues may even-out the playing field between condos and single family residential homes (SFR’s).

According to this Walnut Creek lender, $100 of monthly HOA dues = $15,000+ of purchasing power on average. On the other hand Condos may be a great lower-priced option in a high priced market like Santa Cruz. For example:

    • In the last three months 4 condos priced between $600,000 and $650,000 sold in Santa Cruz County. All of these condos sold in high-priced areas like Santa Cruz city, Aptos, or Capitola. These were mostly high-end or renovated properties with 2 beds and 1 to 2 full baths.
    • On the other hand, 26 SFR’s sold in the same price range in the county, almost all in lower-priced markets in the San Lorenzo Valley or Watsonville with an average of 3 beds and 2 baths.
  • In these same low price markets, 11 high-to-middle-end condos sold with 2 beds and 1-2 baths for about $340,400 on average.

These trends are typical and allow condo-buyers to either buy more property,or buy in higher priced markets. So how do you determine if these gains are being offset by HOA dues?

Take the example above of the 4 condos that sold in higher-price markets (Santa Cruz City, Aptos, and Capitola). The average HOA fee was $507.75. This means that, if the equation above is correct, these buyers would have had approximately $75,000 in additional purchasing power for a single family residential home with no HOA fee. Should they have purchased SFR’s? With $675,000 to $725,000 these same buyers could have purchased a 2-3 bed, 1-2 bath middle-to-low-end home in these same markets. Given the age and condition of these properties, they likely had deferred maintenance, increasing the overall price of the home. On the other hand, the condos in these markets were not only updated, but they had an HOA to take care of some portion of any existing deferred maintenance.

Clearly, it’s not a black-and-white answer whether or not a condo is “worth-it”. The answer to this question largely depends on a buyer’s wants, needs, and preferences. Do you like your privacy, maintaining a garden, and occasional home-improvement projects? Then a condo may not be for you. Are you a busy professional that likes having her landscaping and home maintenance tended to, higher-end interior features, and talking to neighbors regularly? A condo may be the right choice.

If you decide that a condo is right for you, there are certain things that you should keep in mind. Buying a condo requires special consideration of the HOA’s financial health, the state of the building, and the quality of the environment.

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