High-rise living economics

[Nate99]

Just thinking about the market for such in Houston specifically with the proliferation of high rise stuff going up how the numbers shake out.  If you compare the total cost of a condo in a high rise to the total cost of a house, the high rise option always seemed to compare poorly for the big, obvious stuff, but my actual experience with the details there is zero, and houses have a lot of sneaky little costs that are easy to forget in all of the math.

 

It is an intriguing option that, should I find myself in a similar situation some years hence, I intend to entertain fully, but only after researching to utter exhaustion.  For my purposes, I’m trying to identify the different costs apart from the initial purchase price and other costs that would not be significantly different, using my current suburban existence as a point of reference:

 

Home costs:

 

HOA Fees

Lawn maintenance (time and/or $)

Exterior repairs (I’m thinking of a new $15k+ roof every 15-20 years)

Higher Utilities (?)

 

 

Condo costs:

 

Maintenance fees

Special capital improvement/repair assessments

 

What else am I missing that would be significantly different from a cost perspective? My guess is that you’re still just buying location with minimal difference from single family options in comparable areas, but I most certainly could be wrong.

 

[HoustonMidtown]

I just moved from a condo to a home...

 

Insurance costs less with a condo

Property taxes are less with a condo (assuming comparable values of course)

Utility bills (gas/electric/water/sewer), cable bills - this also depends on what is covered by maint fees - our fees covered water/sewer and cable, but not electric/gas - some maintenance fees cover all these

Security system/monitoring - I didn't need one in my condo, necessity in my home

Auto insurance - this may not apply depending on your insurance company, I got a slightly better rate for owning a home with a garage vs condo parking lot

 

Those are the main ones off the top of my head - I will add others if I think of them...

 

[UtterlyUrban]

Exterior repairs for a home.

You have the roof. That's good. Now, how about:

Painting? Every 5-7 years of years.

Pressure washing the deck or patio

Replacing dead landscaping

Cleaning gutters on the 2nd story?

Caulking windows?

Replacing blown AC (outside units) or just maintaining every year.

Attic fans? They break, even the non-powered ones.

Garage door? Fix it or replace it.

Got a fence? It's good for 15 years.

Utility bills will be higher compared to a highrise.

Cracked driveway?

Have an irrigation system? Add maintenance costs for that.

Pool (only fair if comparing to many highrises)? Add maintenance, utilities, and care (weekly)

Mature Trees. Not a huge issue in Texas but, it does cost money to take them down or prune them.

Rubbish removal. This may be billed separately from your taxes if outside the city of Houston limits.

Then you get into the big issues..... Cracked slab, etc. you don't have that sole burden in a highrise.

[Ross]

I just moved from a condo to a home...

 

Insurance costs less with a condo

Property taxes are less with a condo (assuming comparable values of course)

 

Why would taxes be lower for a condo with the same value as a house? There's not a different rate based on type of abode.

 

[HoustonMidtown]

Why would taxes be lower for a condo with the same value as a house? There's not a different rate based on type of abode.

 

 

Because you only pay on a portion of the land - the land is "owned" by all the condo owners 

[UtterlyUrban]

Oh, yes....

I neglected to mention:

Gutters: they do need to be replaced at times (along with the facia and soffits). They are low maintenance for decades (other than cleaning) but, then they will need replacement.

Chimney: if it only burns gas, probably very little to do here except an inspection every decade. If it burns wood...... Clean it routinely. Chimney caps. Need some care too.

Wildlife infiltration. Squirrels, and other creatures can decide to live with you and not pay rent. Extermination bills (plus finding and patching the entry point and repairing any attic damage.

EIFS. If it's on the house, plan on inspections and possible Maintenance.

Wood rot/termite damage to exterior elements.

Exterior lighting fixtures need maintenance.

Here in Houston you don't need to worry about things like retaining walls, etc since it's flat. But you do need to consider drainage. Before you buy carefully look at the yard and patio. Are there areas where it seems that the pitch is coming towards the house? Are there areas with ponding? If so, in a big rain event, you could have water in the house. Re-grade or install a French drain.

[Nate99]

Thanks UU, those are great examples of the "sneaky" cost of home ownership that add up to something significant over time.  Things always seem to work out to "you get what you pay for".

 

Whatever bonus value land and a yard confers is pretty well lost on me, I'm only ever out there when I'm maintaining it. The family likes it out there though, so there we are, for the time being.

[Houston19514]

Why would taxes be lower for a condo with the same value as a house? There's not a different rate based on type of abode.

 

 

 

Because you only pay on a portion of the land - the land is "owned" by all the condo owners 

 

To be completely clear, the taxes are not lower.  But the taxes you pay directly are lower.  The other part (the taxes on the commonly-owned part of the building and land), is paid through the monthly HOA fees.

[innerlooper]

Some other things to consider, when comparing high rise to stick frame single family: high rise is built to a much higher engineering standard, both structure and mechanicals; extra allotted footprint for elevators, fire escapes, mail room, lobby with Dale Chihuly chandelier etc; has to be fire-sprinklered; parking deck also has to be engineered; exterior maintenance/ window-washing from scaffold; and manned security 24/7. Oh and the pool that nobody ever uses.

 

[Sparrow]

At what equilibrium point do developers scrap the townhouse or wrap apartment plans and go the SkyHouse route? If SkyHouse sold each of their 336 units for $300k (low ball average estimate) they'd take in just over $100M. If I remember correctly their buildings cost in the range of $50-60M. Houston has no zoning--why aren't other developers building these all over town? Even a $200K price point would put you above break even.

[HoustonMidtown]

At what equilibrium point do developers scrap the townhouse or wrap apartment plans and go the SkyHouse route? If SkyHouse sold each of their 336 units for $300k (low ball average estimate) they'd take in just over $100M. If I remember correctly their buildings cost in the range of $50-60M. Houston has no zoning--why aren't other developers building these all over town? Even a $200K price point would put you above break even.

 

Have you heard about the Ashby high-rise ??

[KinkaidAlum]

Skyhouse isn't a for-sale building. They are all rentals. Ditto for the Ashby. 

[UtterlyUrban]

High rise apartments are being built because it it very hard to finance a highrise condo given the amount of pre-sales required.

I believe that a significant number of rental towers around the city will convert to condos in the future.

[ArchFan]

I've lived in a mid-rise condo building for 8 years now and I'm still wondering about the cost/benefit aspect.  As far as property taxes, we're taxed on appraised value of the unit, so I think the effect of taxes on common areas is lumped into the HOA fees.  I don't worry about it, but,  it is of course useful to scrutinize the latter.  In all similar condo buildings I've seen, HOA fees are assessed at a constant amount per square foot.  I have one of the larger units in my building, so it's a bit painful when I think about how much I pay.  However, I do receive benefits in return that I appreciate, so I have to consider those on balance.  Our rate/sq-ft is a lot lower than many other places nearby, which offer services that I don't need.

 

I've looked online at places in downtown Austin and apparently a place smaller than mine would cost more than twice and would entail a larger HOA fee.  Doesn't seem worth it to me.

 

In any case, the lock-and-leave lifestyle is very comfortable.  I don't miss (too much) having a yard and I like not having to worry about my place while I'm away.  Plus, I live close to work and have a nice view, which is hard to come by in Houston.

[Sparrow]

Skyhouse isn't a for-sale building. They are all rentals. Ditto for the Ashby. 

 

I realize they are apartments not condos. But what I'm saying is if you were to build a SkyHouse high-rise and sell (instead of rent) off the units at only a $200k average, you'd still be making a profit. How long before some other developer catches on to the business model they've employed building the same building over and over again. It's just like building the same 5 varieties of house out in the burbs--but it seems to be much more efficient and profitable on much less land.  

[samagon]

The mosaic (those two towers on 288) were supposed to be condos, but that tanked and now they're apartments. I think I remember reading somewhere, maybe here, that only a very small population of Houston really wants to live in a condo, and that the number of condo units for sale vs homes is what builders look at when they consider a condo tower.

 

It was probably years ago when I read that, so I probably am mis-remembering.

 

I personally wouldn't mind a condo too much. I could maybe live with a decent sized patio, it would be really tough to curtail my carpentry habit, and without a personal garage (or large enough outdoor space) it would be impossible.

[HoustonMidtown]

The mosaic (those two towers on 288) were supposed to be condos, but that tanked and now they're apartments. 

 

Half of the Mosaic is condos, the other half is apartments

[Houston19514]

I realize they are apartments not condos. But what I'm saying is if you were to build a SkyHouse high-rise and sell (instead of rent) off the units at only a $200k average, you'd still be making a profit. How long before some other developer catches on to the business model they've employed building the same building over and over again. It's just like building the same 5 varieties of house out in the burbs--but it seems to be much more efficient and profitable on much less land.  

 

What gives you the idea that the Skyhouse apartments could be profitably sold for an average of $200K? 

[JJxvi]

I've lived in a mid-rise condo building for 8 years now and I'm still wondering about the cost/benefit aspect.  As far as property taxes, we're taxed on appraised value of the unit, so I think the effect of taxes on common areas is lumped into the HOA fees.  I don't worry about it, but,  it is of course useful to scrutinize the latter.  In all similar condo buildings I've seen, HOA fees are assessed at a constant amount per square foot.  I have one of the larger units in my building, so it's a bit painful when I think about how much I pay.  However, I do receive benefits in return that I appreciate, so I have to consider those on balance.  Our rate/sq-ft is a lot lower than many other places nearby, which offer services that I don't need.

 

I've looked online at places in downtown Austin and apparently a place smaller than mine would cost more than twice and would entail a larger HOA fee.  Doesn't seem worth it to me.

 

In any case, the lock-and-leave lifestyle is very comfortable.  I don't miss (too much) having a yard and I like not having to worry about my place while I'm away.  Plus, I live close to work and have a nice view, which is hard to come by in Houston.

 

Hmmmm...there should not be HOA fees going to pay taxes in a typical condo scenario.  A typical condominium what you are buying is your unit (walls in) and a share of all the common building and land elements.  You pay for your share of land and building in your purchase price and its included in the deed.  The HOA controls it, but if they are paying tax, and your unit is taxed based on the market price units are selling, then the appraisal district is double appraising some of the value of the property.  The market value of all the units added together should equal the market value of the property for tax, because those units all own a share of the rest of the property.

 

In my building, the unit that the Owner's Association occupies to manage the property does not even have its own account, which is as it should be, because that unit under control of the HOA is also owned by the rest of the unit owners and is factored into our purchase prices.

[JJxvi]

I guess there could be other ownership structures where there is some other entity that holds an interest in the land or the building separate from the unit owners, but I don't know if that exists.

[houstontexasjack]

Thanks UU, those are great examples of the "sneaky" cost of home ownership that add up to something significant over time. Things always seem to work out to "you get what you pay for".

Whatever bonus value land and a yard confers is pretty well lost on me, I'm only ever out there when I'm maintaining it. The family likes it out there though, so there we are, for the time being.

I find edging oddly therapeutic. Not a fan of mowing my lawn, even if it is small.

[houstontexasjack]

I guess there could be other ownership structures where there is some other entity that holds an interest in the land or the building separate from the unit owners, but I don't know if that exists.

There are co-ops in New York. Folks own shares in a cooperative that entitles them to use of a certain unit. The cooperative owns the building. The model is seldom, if ever, seen outside of New York. Most lenders are unfamiliar with it and unwilling to provide financing based on it. Austin has the irritating "site condo" model of ownership, but that simply defines a single family home as a "unit" within a condo regime.