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When You Buy a House, Should You Charge Yourself a "HOA" Fee?
Some of the people I've worked with have preferred a house to a condo because they don't want to pay a monthly condo fee, in addition to their mortgage, real estate taxes, and hazard insurance.
With a house, they will have to pay their mortgage, taxes, and insurance, and then they must maintain the place themselves.
Any house is a complex set of systems that have a way of getting clogs, leaks, bugs, electrical shorts, and other signs of a breakdown. There is usually a lawn to mow, driveway to keep paved, paint that peels, and wood that rots or gets eaten by termites. So, just like a condo building, a house will take money to keep it in good repair with all systems working.
Well-run condos set up an annual budget, and an important category is "Reserve Funds". This is to deal mostly with money set aside for expected repairs over a period of time. If a roof lasts 20 years, and the current one is 10 years old, part of the reserves will be set aside so when the time comes, there will be funds to pay for a new roof. There will also be money set aside ... more
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