How much does it cost each year to maintain your apartment? For apartment owners, that answer contains two elements: what you pay to buy the place and what you pay each month to carry it. These two factors, in theory, exist on a sliding scale to one another relative to other comparable properties. In other words, if your maintenance is higher than that of everyone else who lives in a property the same size, then your price should be lower. And vice versa.
Of course, the advent of the ultra-luxury condo, with high monthly costs but extraordinary amenities, has thrown an additional data point into the equation. What is the monthly value of access to an in-house dining room, or maid service, or a screening room, or a pool? It varies, of course, from buyer to buyer, with some for whom it adds nothing and others for whom these amenities are critical to their well-being and happiness in the property they buy.
At the most basic level, the trade-off between price and maintenance is easy to figure. These days we calculate the average maintenance on an upper-end co-op to be between $2 and $2.50 per square foot. On a higher floor, you may be looking at a bit more; on a lower floor, a bit less. Maintenance always goes up by floor, although the percentage of increase varies from building to building.
Another issue: The bigger the apartments in the building, the higher the maintenance on a per-square foot basis. Why? Simply because certain fixed costs, like labor, are divided between fewer units in the building. A 12-unit building of full-floor apartments still needs three shifts of doormen, just as a 25-unit building does, but there are far fewer people between whom to divide that cost.
Here’s an example: Let’s look at a big (5,500-square-foot), two-floor apartment. Since the apartment occupies two full floors in the building, the maintenance seems high at $20,000 per month, or $3.65 per month per foot.
At $2.50 per foot, the maintenance would be $13,750 per month, or $6,250 less—that $6,250, annualized, equals $75,000. How much would a buyer need to invest at 4 percent (liberal in today’s environment) to earn that $75,000? Answer: $1,875,000.
Here’s the interesting point: Buyers fear high maintenance costs. They rarely stop to make the calculation to understand that sometimes these costs can lead to a better deal, in terms of the overall cost, than paying a lot more up front for an apartment with a lower maintenance. We all just have to remember to do the math!
DFW Property Management.com manages properties in the entire Dallas / Fort Worth metroplex. We offer three property management packages: Silver, Gold, and Platinum. Please click on the links to read more about each one, or check out our comparison page. Give us a call at 682-200-6700 if you have any questions.