Condo or Single Family Home???

[rolliefingers]

My wife and I are (finally) shedding our McMansion of 10 years.  It has been nearly impossible to sell, but we have found buyers -- at a $50k loss -- and we could not be happier.  In personal finance, I have figured out how to make and invest money to great effect, but when it comes to real estate decisions I have been anything but "successful."

Our home sale in the burbs of a large Midwestern city has put us in an interesting spot.  I am 45 and my wife is 36.  We will have a stache of $2.4MM and no debt, post-sale.  Without the burden of a too big home, its utilities, upkeep, taxes and HOA, our annual spend is likely to be around $60k.  With a 2.5% SWR I will be more than comfortable in ridding us of my all consuming and "stressful by design" corporate gig.  We love to travel and, on the cheap/via travel hacking, plan to do as much as we can; my wife is from Europe so we will be able to spend more time with her family as well with the life re-design.

In the process of downsizing, we are considering a single family home but are intrigued by the possibility of condo living.  With a SFH we would likely carry a small mortgage ($350k purchase price).  The condo, we would pay in full ($260k).  *THE CATCH in my mind -- $571 per month for a condo HOA fee.  I absolutely hate the idea of this ongoing cost, yet the condo location (in the city) and the ability it provides for us to lock the door and leave for months at a time is extra appealing.  Special assessments scare the hell out of me.  I am also concerned, to a lesser extent, about the low depreciation of a condo compared to a SFH. 

If anyone has thoughts on this small conundrum or has advice about SFH versus Condo living in general, then I would appreciate the feedback.  Cheers.

[Kash101]

I had the same issue, and am currently in a downsizing mindset as well, and making similar changes. We ended up selling out townhouse, ( ~ 600K profit ) , putting that in the market and buying a SFH ( ~ 2.6M) , have a similar nest egg as you, and now want to sell the house and consider shifting back, but worried about the HOA as well. Maybe get on the board of the HOA so you have more control ? I always think the phantom costs with home ownership ( gardner, etc ) may equal or possibly outpace an HOA , but its unpredictable and very geography specific.

[CowboyAndIndian]

...
*THE CATCH in my mind -- $571 per month for a condo HOA fee. 
...

What do you get for $571/month? In the condo I bought, I got cable, internet, water, sewage, pool maintenance, lobby employees etc.. In an SFH, you will be paying for those plus any garden maintenance.

I would pay the little extra for the condo for two reasons. It is a little safer (someone in the lobby and fobs for entry to elevator). I can also go away for a couple of months without any worry.

[MNBen]

You also have the ability to stay semi-informed of the association happenings, so that you will be able to likely foresee a special assessment.

Also, if the association is already established, you can usually read past minutes/documents to get an idea if this association is run the way you'd prefer, such as no power-hungry people running it, no bickering or ongoing homeowner battles, etc.

A special assessment is typically just under-saving.  For example, roofs last 20-30 years, so should be saving 1/20th every year.  If they aren't, then you can expect a special assessment.   Sometimes a special assessment is for an unexpected repair or improvement. 

That being said, as a homeowner, a special assessment can also come up for an unexpected repair.

[lizzzi]

Why not just rent a nice apartment?

[Slow2FIRE]

...Maybe get on the board of the HOA so you have more control ?...

Any ideas of what type of liability an individual would have as a member of an HOA board and how to make sure the HOA liability insurance covers you (even if the HOA is somehow dissolved or bankrupt)?  I ask this purely out of curiosity.

[Goldielocks]

...Maybe get on the board of the HOA so you have more control ?...

Any ideas of what type of liability an individual would have as a member of an HOA board and how to make sure the HOA liability insurance covers you (even if the HOA is somehow dissolved or bankrupt)?  I ask this purely out of curiosity.

The HOA should have director's liability, that covers the board, in general.
It does not cover you if you intentionally void a contract signed in good faith, or were personally liable for a safety incident ... i.e., you handed out steel mock swords to drunken participants at an on-site event you planned and hosted, even when another board member clearly said no.

[rolliefingers]

If we got the same as what you've described here, then we would take it.  Minus cable, internet and pool -- that's the scenario we are looking at.

...
*THE CATCH in my mind -- $571 per month for a condo HOA fee. 
...

What do you get for $571/month? In the condo I bought, I got cable, internet, water, sewage, pool maintenance, lobby employees etc.. In an SFH, you will be paying for those plus any garden maintenance.

I would pay the little extra for the condo for two reasons. It is a little safer (someone in the lobby and fobs for entry to elevator). I can also go away for a couple of months without any worry.

[patchyfacialhair]

Everything is relative, but $571 seems steep to not include cable/internet/pool. Even just adding internet (since the other's aren't essential or mustachian), you're looking at $7200 a year minimum (with increases every year) in addition to taxes and insurance. Seems steep for a place where you'll probably hear your neighbors flushing toilets and slamming doors.

[nwhiker]

The condo is $90k less so that is 13.1 years before you the initial cost of the SFH, and that doesn't account for mortgage origination fees and interest. Having lived in both  my experience is that utilities will be lower because you will have units above or below you (or both).

The main issue is whether the reserve is properly funded. Some associations will have their reserves audited and that might be helpful in making your decision.

[curlyfry]

We live in a 1000 sq ft condo & love it.  Purchase price literally half the cost of an equivalent house (newer build, open concept, etc).     Has great storage (closets, bathrooms etc) -better than most houses.  We will take some of our extra money to add nice touches (custom desks or bookshelves, etc) 

Condo fees covers most insurance & our own insurance is only $18/month.   Heat is only $60-70/month (easily half the cost of others.)  Yes it doesn't appreciate as much but that doesnt matter if you have enough & and plan to stay for the long haul. 

Although being on the condo board is annoying, living in a building gives a sense of community as well (ie. 8 year old down the hall babysits my cat)

If there are special assessments that isn't always bad (cause that means you get to keep more of your money & invest it -so you have more of it when the assessment comes up) ~rather than having it sit in the strata fund barely keeping up with inflation.