My condo sold, a look at the numbers

As Monty Python would say “and now for something completely different”

The condo – I finally sold my condo. There were a lot of things I learned about being in a condo because it was not the best experience. This condo was in Lynnwood Washington and I owned it from 2014 to 2019, when the market doubled my value over that 5 year span.

I think I will do a couple blog posts on my takeaways from the condo. Would I buy another condo - yes, but with a lot more scrutiny.

This post is on the money aspect of owning my condo.

I started the condo with a loan for $125,000 and the HOA fee’s where $290 (this included water, sewer and garbage). My total outgoing on this unit was about $1200 a month. Which was comparable for a 2 bedroom rental in the same area at the time. And was very doable.

By the end of year 1 I had a good tax return and thought I would redo the floors. I have a dog that sheds and thought I would be better off with a laminate. Got the flooring for about $1200. My friend and I had done her house, this had much straighter lines, we thought it would be easy. After pulling up the carpet we found a hole. I thought it was the windows. They all were aluminum double pane and very old. They had some moisture, very obvious the seals had failed. So I did the most logical thing, I called up a couple places and got all the windows replaced at the same time, and the slider. Because I got this from a big box and it was 4 windows and a ginormous slider, $7000 project loan.

The hole was not from the windows failing, it was from the siding failing. The window people almost didn’t even put the window or slider that was on the affected wall.

I had an inspection when I bought, and I figured out what they missed. For the next 4 months I would take out my kitchen and live in a construction zone where at one point I did not have a wall for about 10 days. By the end of it, I had new windows and the HOA had paid for a new wall.

I did a re-fi to pay off the windows and a car – now I am in it for $160,000 (My condo appraised at $180,000 by this time). The condo fee’s where around $325 and my total outgoing was about $1400. Still doable.

After about a year of living with no floor and about 6 months of living with no real kitchen because we couldn’t figure out the countertop part, I went back to the big box store and bought the kitchen with appliances – for about $10,000 with installation. Another $150 a month.

Last year I wanted to make life changes. And I did make a few. And by March I was going broke and knew my increased costs for the condo now exceeded my ability to pay.

My $1100 a month in 2014 (Loan $125,000 and HOA of $290) had ballooned into $1600 a month AND I had a special assessment in the fall of 2018 of $6,800. The HOA raised the dues to where I was paying $390 a month. My loan for $160,000 had increased the payment by $200 in one year because my taxes doubled. And while I was able to pay a majority of the special assessment off with some cash I had set aside, the increase in monthly obligation got to much and I had to sell.

And by this time I was suffering from PTSD because it took so long to finish the construction project, the fact that every time I turned around there was something that I was hearing about that made me nervous about another special assessment and just being financially buried for a place that every time it rained I was afraid of finding a leak or something that would keep me from moving.

I was able to sell. I did get some cash out of the deal. I worked hard to show my place. I got the price I wanted and I got out. My PTSD is much better.

My financial takeaways on this would fall under ‘if I bought another condo’…

Taxes –

Take the amount of time I plan on owning the property and doubling the taxes every 5 years. Maybe its not specifically taxes that raise, but it might be school levies or some other community wide thing that increases the cost of the tax portion of the condo cost.

HOA fee’s –

A good HOA is going to raise the fee’s on a condo to keep pace with inflation and increases in costs. I will factor in a 5% to 10% increase in dues every year when I look at my next condo. This could be a condo that is in a building attached to the other condos. Condo’s that are detached houses, that is not what I am talking about for this post.

Special Assessments –

The you can’t control it Cap-X. One of the hard parts about this process was not only paying the special assessment, but the time it took to find contractors, the time it took the HOA to review and the time it took for them to complete the job. In my case, I had a great contractor who worked on my wall and had it done in less than 1 month after we found the issue.

The special assessment was for the same issue I had in my unit, but this time it affected two other units. The HOA had a leak detection group come out. They had engineer studies. At one point the HOA thought they had made a decision and 3 months later the property management company came back with a question about what the decision was. These two unit owners who had the same issue lived with the water intrusion issue for almost 16 months before the repairs were completed. The work was subpar. $120,000 to repair the wall for the new leak cost each unit owner about $6,600. For the work and materials done, we way over paid. Even if you could do the work yourself or could do a better job of managing the job, you are at the mercy of the board, the timeline of the board and property management and the mercy of other unit owners’ votes. The board and other unit owners probably are not as knowledgeable as you, and it will be frustrating.

Even if I live in a condo or retire in a condo – I will always have a reserve for the special assessment. From my experience, this SA CapX I would feel comfortable with around $20,000.

After all this – financially does a condo make sense – yes. I can make the numbers work, even in what happened to me, if I own a condo free and clear and account for these issues before hand.

Lets say I owned the unit with no mortgage. The HOA fee going to $400 (water/sewer/garbage are paid for) with $200 a month in property taxes still makes this way under market value of a comparable rental. My condo could have rented for $1600 to $2000 a month. Even if I took an SA of $10,000 over a one year period, my cost would be about $1,235 a month plus $200 in taxes. $1435 is significantly under the cost of one years rental.

I hope this helps you if you are looking at purchasing a condo. While my experience was not the best, there were people that had bought units in this same group of condos as foreclosures for a dirt-cheap price. They are still significantly ahead. I lived the worse case scenario. Most people are not going to have this level of F’d up one thing after another, every year, for 5 years. But it does happen, it could happen, and thinking about it will at least prepare you if you find yourself in the same situation.

One other side note to all this. I wanted to sell the last 5 years but couldn’t sell for what I owed because: the original damage I found (2015), then I was in a construction zone remodeling(2016, 2017), then I was waiting for the building repairs for the other unit to be completed(2018, 2019). There was not a good time for me to sell and get a good price to pay off all the financial mess I had created over this time. I actually had created a situation where I could not get out of this because of the financial situation I was in. I sold this spring because it was the first opening I had to do so and make back what I owed plus a small cushion of savings.