How To Analyze The Cost Of A Condo

analyze the cost of a condo

Many first time buyers and even some real estate agents misunderstand how to analyze the cost of a condo.

Here are a few things to consider when analyzing the cost of buying a condominium.

Analyze The Cost Of A Condo – Balance Sheet Reserves

The financial strength of a condominium association or strata has a big impact on the actual cost of buying a rental property such as a condo.

Condo buyers make the mistake of looking only at the profit and loss statement of the association.  They almost never look at the balance sheet showing the reserve budget.

The profit and loss statement can show a positive cash flow.  But the condo association may have very little money in the bank for an unexpected common area repair.

Budget Reserves Are A Big Deal

When a condo association needs money and doesn’t have it, the condo owner gets billed for a special assessment.

While the phrase sounds innocent enough, what it really means is that the association didn’t plan properly by saving money for a rainy day.  And the owners are the ones who will have to pay.

That’s why looking at the amount of reserves are so important when a buyer wants to analyze the cost of a condo they’re thinking about purchasing.

Imagine if you’re the owner of a condo – especially if you’re a first-time home buyer – and all of a sudden you have to pay $1,000 extra per month for the next 12 months to cover your share of an un-budgeted expense.