ᐅ Condominium as an investment property, maintenance reserve fund

I have a few questions for investors in condominiums.

As far as I understand, owners of condominiums pay a monthly fee for the building’s maintenance and administration.
This fee includes both service charges that can be passed on, service charges that cannot be passed on, ongoing maintenance costs, and the reserve fund for communal property.

For the reserve fund of the individual unit, there are different calculation methods, such as the Peters formula or according to the Calculation Ordinance.
If I interpret this correctly, using the Peters formula, for a building approximately 12-15 years old (historical construction costs for a multi-family house estimated at 1000€/m² (92.9 sq ft)), you would arrive at about 1€/m²/month (0.093 $/sq ft/month).
According to the Calculation Ordinance, for a building younger than 22 years, it would be 0.60€/m²/month (0.056 $/sq ft/month) or 7.10€/year (0.66 $/year).
How realistic are these numbers?


In addition to the communal property reserve fund, one should also build a separate reserve for the individual unit. What order of magnitude should one realistically expect when calculating this for a building about 12-15 years old?

The context is an investment in a condominium apartment to rent to parents.
For an initial rough calculation, I would like to know approximately what ongoing costs (excluding interest) the landlord should expect to incur over time.

We had a maintenance reserve of €2.50 per square meter (m2) of private property area per month. After 10 years, the roof and facade were renewed without a loan. The building dates from 1935. The condominium association (8 owners, all living on-site) did not want to take out a loan. After that, the monthly contribution was reduced to €1.50 per m2.

We ourselves set aside €200 per month for repairs to our private property.

Sylvia

Computersylvia schrieb:
We had €2.50 in monthly maintenance reserves per square meter of individual property area. After 10 years, the roof and facade were renewed without a loan. The building dates from 1935. The homeowners’ association (8 owners who lived there themselves) did not want a loan. After that, the contribution was reduced to €1.50/m2.

€2.50 is quite high, but it probably resulted from too little reserves being built up beforehand. Even €1.50 is significant when rents are only around €5.

Computersylvia schrieb:
We personally saved €200 per month for repairs to our individual property.

How many square meters do you have? Did you actually need that amount?

Hello Musketier,

Musketier schrieb:

The background is an investment in a condominium to rent to the parents.
For a rough initial calculation, I am interested in what approximate ongoing costs remain for the landlord (excluding interest).

From my experience, it is not effective to rely on formulas or calculation templates, as every homeowners’ association has different ideas regarding the reserve fund to be established. Therefore, I would recommend focusing on the condition of the property and then setting aside a personal amount for repairs to the individual unit. The owners’ meeting will certainly inform you how much money must be paid monthly into the communal fund.

It is important that you obtain comprehensive information about the existing reserve fund as well as ongoing maintenance. I am confident that—with your professional background—you will be able to assess whether the figures presented are realistic.

Best regards, Bauexperte, and good luck!

Musketier schrieb:
€2.50 is quite high, but it’s probably due to insufficient reserves built up beforehand.
However, even €1.50 is significant when rents are only around €5.

For how many square meters? Did you actually need that much?

The house was privatized again in 1991. The Western owner wanted a fixed amount. Each owner personally guaranteed for everyone else (yes, that only existed for former East German citizens).
This made it possible for everyone living in the building to purchase their unit.
But no one wanted an additional loan. Some probably wouldn’t have qualified for one anyway.
So, strict savings were applied for 10 years. The supervising architect lived in the building, and the property management was well selected.
We had a 120 m² (1,292 sq ft) apartment.
Rents in the area would more likely be around €9.
For maintaining the individual property, we spent about €1,000 per year plus a one-time €10,000 for laminate flooring and €10,000 for new windows.
We lived there for 15 years.
We always did the painting ourselves.

Sylvia

Bauexperte schrieb:

From my experience, it is not very effective to rely on formulas or calculation templates, as each condominium association has different expectations regarding the reserve funds to be established. Therefore, if I were you, I would focus on the condition of the property and then set aside a personal amount for repairs related to the individual unit. The owners’ association meeting will certainly inform you how much money per month needs to be paid into the communal fund.

This is not so straightforward, as the apartment is not officially for sale.

Maybe I need to explain a bit more.
The apartment was actually my parents’ “dream apartment” to use as a retirement home, since it is on the ground floor right next to my parents’ inner-city garden plot. The apartment is close to the town center of a small town, so most daily errands can still be managed on foot even in old age. So it is basically ideal.

My parents have expressed some interest before and have now been approached. The problem (according to my parents) is that the owner might want to sell the apartment in about 10 to 15 years, and they are afraid of a potential owner-occupier termination notice in their old age. That is why they want to decline. Buying is not an option for them due to their age.

Now I wanted to first gather some preliminary information about what costs I would face in addition to purchase price, mortgage, and taxes before I start bothering others with my idea.
If this basically works out, I would discuss it with my wife and my parents to see if they could imagine this arrangement, and only then would I contact the owner to find out if they want to sell at all and, if so, at what price.