HOA expenses

Most developed communities impose an HOA expense. What's this all about?

When looking at properties here in Costa Rica, many of my Buyers are surprised at the Homeowners Association or HOA expense associated with a community.  This expense might be a new consideration, as individuals living in North America may own a ‘freestanding’ single family home or rent.  This blog should serve to shed light on the HOA concept, especially as it applies in Costa Rica, and make you comfortable with the expense.   

With many of our newer properties, a developer has added amenities and services to be shared by all residents; such as swimming pool, landscaping, perimeter fencing, elevators, etc.  These become part of the HOA community, and the expense to maintain is shared by the owners.  Additional shared expenses might include overall management or administration service for the community, security services, water, air conditioning, external building upkeep, insurance for the building/development, cleaning, and the like.  A community may also be setting aside money for capital replacement or major projects, as a reserve fund.  That’s a good thing!  All of these shared expenses are controlled by the owners, budgeted and approved annually at a meeting of the HOA.  Most often, the fees are assessed or charged monthly.  We notice that for communities with only a few home or condos, the fee is typically higher due to the fact that the overall shared expense is divided by a fewer number of owners.  In some circumstances, the maintenance expenses are subsidized by developer; as in a resort property.

When contracting for purchase, make sure your Realtor provides a provision in to get you financial information on the HOA including budget and reserves.  You and your attorney might also get and review minutes for the past meetings.  Be sure to learn what is included in your monthly expense.  Weigh this expense against what it would cost if you had to cover and manager a service in full, for example if there was no community of owners.  It can add up quickly, though you get to choose which services you want and value. 

Regardless of expense level, recognize that the HOA payments will be part of the monthly overhead for your investment; whether you are using the property for yourself or renting it.  Be sure you are comfortable with this payment.  Be assured that by choosing a strong and healthy HOA, your investment will remain strong even in your absence. 

 

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