On websites like Century21.ca or REALTOR.ca, there is a small box where REALTORS write descriptions of the homes they are selling. Often these descriptions are as generic hockey interviews - someday a REALTOR will mistakenly write 'this home always gives 110%' and 'this home wants it more than the other guy'. One generic phase that keeps coming up, especially in descriptions for low priced single family homes, drives me crazy:
'Stop paying condo fees.'
Lean in, come a little closer, I'm about to share a secret with you - condo fees are a really good thing.
You see, if you own a home, you need to be putting money away for maintenance or unexpected problems. You already know that because you read about it last week.
Your dog runs really hard into your fence causing it to collapse. No big deal, rebuild it. Your child sees it and thinks it's hilarious so they do the same to the wall in the living room. No big, move some electrical around (with permits) and you now have an open concept. Your hot water tank is over ten years old. No big deal, replace it. It's only a big deal if you didn't plan for it. But your home inspection also gave you a list of things to plan for and you followed it closely, because, again, you read about it here.
A freak hail storm destroys your roof. That's a pretty big deal. Especially if there's no money in the bank.
I pay under $200 per month for condo fees. A portion goes to upkeep. A portion goes to the Reserve Fund.
When my eaves trough leaked, it got fixed. When the pavement cracked, it got fix. I didn't pay an extra dime. The money to do these simple things comes from the upkeep portion.
If a tornado rips my roof off and throws it through the windows of a liquor store: a) I'll drink for free in my basement; b) I won't worry where the money is coming from to replace it - partly because I'll be too drunk, but mostly because the condo board makes sure there's enough in the Reserve Fund.
That's a pretty sweet deal.
So here's my sage advice: if you own a home, never stop paying condo fees. Just pay it into your own bank account. Set up an automatic withdrawal with you have to.
Put money away every month to for the purpose of maintaining your home: the Upkeep Fund. Then, put some cash in a Reserve Fund for those unexpected disasters. Make sure there is enough, or you have a plan to build up enough, to make a major replacement.
"But Tim, my bank approved me for a mortgage so massive I've only eaten Wonderbread with Cheeze Whiz for the last month and my account is still in the red. I'm considering something as drastic as cutting back on my HD cable. How can I pay myself a condo fee?"
Well my friend, that's the greatest disaster of being house poor. More on that in a blog to come.