Tuesday, June 17, 2008

Comparing 2 VA Townhomes with different HOA Dues.

Recently I got this deep within an email:
"We don't want to consider homes with an HOA fee over $100."

To that, my reply is:
Instead of completely deleting them from the running, try making some adjustments to compensate for the HOA fees (or Condo fees), so that you are better comparing Apples or Apples.

For example, if two Alexandria Townhouses are $300k. And one has an HOA of $100 and another has an HOA or $200, then ask your lender what $100 a month in buying power gets you at your current rate.

Let's say it is 6%, the extra $100 per month, is $1,200 per year or about $20,000 in buying power ($20,000 at 6% is $1200 a year or $100 a month).

So that the townhouse with the $100 more expensive HOA, should be $20,000 less (assuming all else is equal, which is never the case). Also note that HOA fees are far more likely to increase then a 30 year fixed loan, so if you wanted to dock it another $5,000, that would make sense too.

So if you find a $275k place with $200/mo HOA and a nearly identical $300k place with $100/mo HOA, you should consider them equally in terms of monthly payments.

Written by Frank Borges LL0sa Broker FranklyRealty.com

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