ᐅ Condominium as an investment property, maintenance reserve fund
Created on: 22 Jul 2015 11:28
M
Musketier
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.
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.
B
Bauexperte23 Jul 2015 09:51Good morning,
That is somewhat clear to me in the back of my mind.
On one hand – if the owner agrees to your idea of “selling now,” in my opinion, you have hardly any other options than those I described in my first response. The (rather few) replies to your thread don’t show any consistent formula or calculation basis regarding reserves for maintenance; but of course, I may be mistaken. You will only receive reliable answers if the owner provides you with the necessary documents that enable you to evaluate how feasible a sale would be.
On the other hand, I am always cautious about statements like “possibly, maybe in 10-12 years,” because a lot can happen in that time (your parents might also have misunderstood a statement). If the owner is healthy and financially independent, your parents can probably wait out that timeframe without concern. However, if any of the parameters change – and there certainly are more – the “planned” future can quickly become uncertain.
Therefore, for me, there is only one feasible way – talk to your family (your parents should know the amount of the condominium fees/building fees and the private reserve for special property). If they agree with your idea, arrange a meeting with the owner. If he insists on selling only after several years, try to negotiate a right of first refusal. If he agrees to a sale, you know that you can act in agreement with your family.
Either way, in my opinion, only a conversation with the owner can bring clarity.
Best regards, Bauexperte
Musketier schrieb:
I think you misunderstood me. If that were the case, I would have tried to buy the apartment right away instead of in 10-15 years.
That is somewhat clear to me in the back of my mind.
On one hand – if the owner agrees to your idea of “selling now,” in my opinion, you have hardly any other options than those I described in my first response. The (rather few) replies to your thread don’t show any consistent formula or calculation basis regarding reserves for maintenance; but of course, I may be mistaken. You will only receive reliable answers if the owner provides you with the necessary documents that enable you to evaluate how feasible a sale would be.
On the other hand, I am always cautious about statements like “possibly, maybe in 10-12 years,” because a lot can happen in that time (your parents might also have misunderstood a statement). If the owner is healthy and financially independent, your parents can probably wait out that timeframe without concern. However, if any of the parameters change – and there certainly are more – the “planned” future can quickly become uncertain.
Therefore, for me, there is only one feasible way – talk to your family (your parents should know the amount of the condominium fees/building fees and the private reserve for special property). If they agree with your idea, arrange a meeting with the owner. If he insists on selling only after several years, try to negotiate a right of first refusal. If he agrees to a sale, you know that you can act in agreement with your family.
Either way, in my opinion, only a conversation with the owner can bring clarity.
Best regards, Bauexperte