Affordable oceanfront condo resorts offer enticing opportunities for both lifestyle and investment. However, the presence of homeowner association (HOA) special assessments adds a layer of complexity to ownership. This overview delves into the intricacies of HOA special assessments at such resorts, examining their types, implications, and strategies for prospective buyers. Understanding these dynamics is key to navigating the nuances of coastal condominium ownership effectively and preserving your profit.
There are different types of homeowner association special assessments. First, There are special assessments that impact the resort as a whole so every owner at a resort must pay for the special assessment. Next, there are special assessments that impact the resort as a whole but are charged based on unit bedroom-type as a percentage of the overall special assessment cost. Finally, there are special assessments for multiple building resorts that will only impact the owners of a particular building.
Special Assessments that Impact the Resort as a Whole.
If the HOA issued a special assessment to cover insurance cost increases, every owner is going to have to pay the special assessment for the increased insurance premiums. This is impacting all the owners as a whole.
For example, let’s say that insurance costs are increasing by $54,000.00 at a resort that has 54 units. The owner of each unit can most likely expect a $1,000 special assessment fee to cover the $54,000.00 increase in insurance cost that the resort experiences as a whole.
Special Assessments Charged as a Percentage of Unit Bedroom-Type
There are special assessments that impact the resort as a whole but are charged based on unit bedroom-type as a percentage of the overall special assessment cost.
For example, plumbing pipes that need to be replaced. In my experience, the cost of a special assessment like this relates specifically to the unit bedroom-type. If you have a 1-bedroom unit, you’re going to get charged a lower fee than an owner of a 2-bedroom unit. If you have a 2-bedroom, your fee will be lower than the owner of a 3-bedroom. If you have a 3-bedroom, your fee will be lower than the owner of a 4-bedroom unit for these special assessment repairs.
In a hypothetical example, a 1 bedroom might pay $3,000 for plumbing repairs, as where a 2 bedroom might pay $5,000, a 3 bedroom might pay $7,000 and a 4 bedroom pay $9,000.
Another Example Based on Fixing Foundation Repairs.
In my experience, Special Assessment fees can also be split across every bedroom-type unit at a specific percentage. Let’s say there were foundation issues that needed repair at an Oceanfront Resort.
If there’s an overall special assessment fee of $200,000 that needs to be paid, then smaller units pay less, and the larger your unit, the more you pay for the special assessment. For example, a 1 bedroom pays a special assessment of $20,000 at 10% of the overall special assessment cost, a 2 bedroom pays a special assessment of $40,000 at 20% of the overall special assessment cost, a 3 bedroom pays $60,000 at 30% of the overall special assessment cost, and a 4 bedroom pays $80,000 at 40% of the overall special assessment cost.
Now, these numbers are reduced significantly based on the total number of each bedroom-type unit at the Oceanfront Condo Resort. For example, if there are 20, 1-bedroom units at your Oceanfront Resort, then the 10% of the total cost for the special assessment for 1 bedroom foundation repairs at $20,000 is now allocated across all 20 units reducing the fee each owner pays to only $1,000. Thus, 1-bedroom owners pay a special assessment fee of $1,000. Similarly, if there are 20, 2-bedroom units at your oceanfront resort, then the 20% of the total cost for the special assessment for 2-bedroom foundation repairs at $40,000 is now allocated across all 20 units reducing the fee each owner pays to only $2,000. Thus, 2-bedroom owners pay a special assessment fee of $2,000. This process is repeated—respectively—for all bedroom-unit types.
Special Assessments for Multiple Building Resorts.
If you’re in a resort with multiple buildings and the building that you live in does not have issues that need repairs, but a different building does need repairs, you’re most likely not going to be charged for fixing the other owners’ building. It doesn’t make much sense that you’d pay fees to repair a building that someone else lives in. However, every HOA is different and these facts must be confirmed.
Generally, multiple building resorts will only share expenses on things that mutually benefit them.
They will share expenses for things like:
· Shared marketing
· Landscaping for entire community
· Shared amenities
3 Tips to Beat Special Assessments When Buying an Oceanfront Condo
Tip #1. Have your Broker check the master deed to determine if special assessments for repairs taking place at other buildings will be charged to all owners at the oceanfront resort or just the owners at that particular building.
Tip #2. Sometimes special assessments will be mentioned in the HOA meeting minutes or Budgets but not be determined yet. If no determination has been made, have your closing attorney send a letter to the HOA asking for an outlay of the estimated fees or even a range of what the fees could be so that you’re an informed investor and not buying blind to the upcoming special assessment fees.
Tip #3. Have your broker ask how many contractor quotes the HOA received before moving forward with the more recent projects that resulted in special assessments. You want to make sure the board is doing their due diligence rather than just simply trying to get things done.
The presence of homeowner association (HOA) special assessments in affordable oceanfront condo resorts raises concerns about equitable cost distribution among owners. These assessments can vary based on factors such as unit size and resort-wide needs. While some special assessments impact all owners uniformly, others are proportionate to unit types, potentially burdening owners of larger units. Moreover, multi-building resorts may impose assessments differently, necessitating careful examination. To mitigate risks, prospective buyers should scrutinize HOA documents, anticipate potential assessments, and assess the board's decision-making process.
Call today to discuss your next Oceanfront Condo purchase in the Myrtle Beach Real Estate Market: 843-360-1737
Disclaimer: All information given is meant to be educational. I am only passing on historical information shared with me by owners, rental companies, and various publications. I am not guaranteeing these numbers, nor can I guarantee future rentals or appreciation. This information is not intended to replace your own research, or to provide legal, investment, or financial advice. Please consult an attorney for legal advice.