Should I be scared away by high maintenance fee?

Yes and yes.

Try to find out why the maintenance is high. Perhaps there is a good reason for it.

The short answer is yes, above-market maintenance costs do affect resale. When compared side-by-side with a unit that is otherwise comparable and has market maintenance costs, the unit with higher maintenance will always sell at a discount. Think about it this way, $500/month is worth more than $100K in additional mortgage principal at current interest rates.

Dan Gotlieb
Digs Realty Group
www.digsrealtynyc.com

Thank you for your responses. The RE lawyer said he will be looking into the buildings financials before I sign to figure out why the maintenance is higher than average. They were asking $589 and my accepted offer was $578 - likely not enough of a discount considering the high maintenance. I love the apartment and can afford the monthly payments, but now I'm wondering if this is a bad deal. Thanks again or the responses.

Maintenance is usually largely four elements: property taxes, payments on the building's underlying mortgage, labor, and building capital projects. The first two are tax-deductible, so you can get a back-of-the-envelope sense of how proportionate they are in this building by finding out what percentage of maintenance is tax-deductible.

Even then, if you love the place see what your attorney has to say. There are a number of "high maintenance" scenarios that wouldn't stop me from buying, if I loved the apartment.

ali r.
{downtown broker}

Don't rely on your RE lawyer to tell you about financials. You should figure it out by reading it yourself and comparing to other buildings. The most common reason for high maintenance are being a small building so less apartments to spread costs over.

I bought an apartment with a high monthly maintenance charge because I loved the unit and because I could afford the maintenance. It is what it is - in a market like this one, the monthly operating cost will be priced into the purchase price anyway, so there's no reason to think you're getting a 'bad deal' because the maintenance is high versus low.

What's MUCH more important is: a) whether you can you afford to pay it, b) what percentage is tax deductible (over half of my maintenance is tax deductible...a huge savings), and c) whether the board is controlling costs and limiting annual increases. This last one is probably the most important. My board has done a very good job of limiting cost increases to around 2% per year. This is not easy, but it is REALLY important. For this year, we did not see any increase in maintenance due to really good board stewardship.

Make sure you are comping maintenance appropriately.
Average manhattan maintenance is @ $1.80 per square foot.
That is average for all of manhattan.
That includes greenwich village with a doorman and elevator as well as an alphabet city walkup.
Your apt is $2.29 which is a bit high and reminds me of some midtown east neighborhoods which is why they seem to trade a bit below market.
As dandigs points out, a good way to assign value is what that extra $250, $300 a month costs you in a mortgage payment value.

Keep in mind if you fall under AMT (alternative minimum tax) , your maintenance deductibility will be a mute point.

All of these responses are incredibly helpful and much appreciated. Crescent22 -- do you know how I can gain access to the buildings financials without the assistance of my lawyer? This is a 12 unit building which is the likely reason that the maintenance is $2.29/sq ft. Not sure if that in itself should scare me away since I'm in trouble if something big goes wrong to the building.

I do really love the apartment and can afford the payments, so will just make sure I am well educated before I sign my life away next week! Thank you again for the time.

Read threads about living in a small building to get a sense of what it's like. A small building with a high underlying mortgage plus a managing agent plus any services is going to have higher than average maintenance.

On the other hand, it could be the lesser or two evils. I lived in a small, self-managed building with maintenance around $1.50 per square foot. The building would have run a lot better, with a lot fewer headaches, if maintenance were closer to $2 per square foot. Getting things done required a lot of shareholder time and effort (and usually the same two shareholders, me being one). Some things just never got done. Serious problems -- like a blocked air conditioning drain in 100-degree July heat -- took two weeks to fix sometimes. Email traffic from residents could be very heavy, with many having opinions and few willing to lend a hand. We couldn't even fill the Board. I'm not sorry with the choice I made, but I would not do it again.

Maintenance rises at a faster rate than inflation , especially when there's a mayor who looks to fund pet projects on the back of co-op and condo owners .
In a rising RE market , your property may go up in value so you don't care , but in a softening market your property value may stagnate while your maintenance keeps rising .

Inspect the last few years maintenance increases vs inflation

Buyer/bidder getting financials is a normal part of the bid process. It is not normal for only the attorney to get it. You may have to ask but they should not say no, especially after you have bid.

Size of the building (how many units) doesnt automatically translate to a high maintenance.
I live in a 12 unit co-op building in Chelsea and my building averages @ $1.30 per sq ft maintenance. (elevator, no doorman).
We havent had a raise to maintenance in 2 years.
Its more from good board management and participation, we run a tight ship (with 12 units half the building is on the board) and a key point, the building has no underlying mortgage.

Lad's point has some validity though our building has an outside management company. The scenario Lad laid out about the 2 weeks and the large email chains can and do happen.
But Im not so sure that exact issue would have taken much shorter to fix in a big building.
I used to live in the Rivergate, a 35 story rental building with 2 towers. My leaking A/C took a month to have fixed correctly.

Big building and small building living each have their merits and disadvantages. After 20+ years of renting many kinds of apts and buildings, I've found that good neighbors living next to and above you are the most important thing.

Thanks again - this thread was a lifesaver. I ended up pulling out of the deal and not signing after realizing that in an apartment more in line with average maintenance costs would give me more purchasing power in the form of a higher loan amount due to my debt to income ratio monthly. Seems like a no-brainer to get a nicer, more expensive apartment and end up paying LESS per month due to the nice low borrowing rates. Thanks again to everyone who helped me with this.

If you like the apartment, you can always ask to see the budget, cashflow and board minutes which may help shed some light on why the maintenance/ common charge fees are what they are and if they are reasonable. if its too much work, just walk and look at the next unit on your list.

RE + Payroll , in general , should be 70-75% of the annual budget

70-75% for payroll? that sounds enormously high. Biggest component of budget in a small building is going to be property taxes, which could easily be more than 50% of total budget. (The last townhouse-y building I sold in, which was admittedly self-managed, they were two-thirds).

Even if we are just talking about the operating budget, you also have to squeeze in utilities, heat and insurance ... and those components can get you to 30% pretty easily.

Ali is correct, having seen countless setups for multi unit buildings, the range for a buildings budget always fall between 40% to 75% for property taxes alone.

75% of my maintenance is taxes.

Meant to say ...... RE + payrolls should be 70-75% .... ( taxes around 50-55% , payrolls 20%)

The "plus" sign is not coming out on my PC for some reason ( RE plus Payroll)

JJ2, that makes much more sense!

>>>Maintenance is usually largely four elements: property taxes, payments on the building's underlying mortgage, labor, and building capital projects. <<<

Ali--isn't it always better for a building to keep cap projects separate from operating costs? I would be very nervous about a building that increases maintenance to cover the cost of a cap improvement project--far better to do a short-term assessment as needed IMO...

Or flip tax reserves. My building has a substantial reserve we use for capital improvements and local law 11 work.

Yes, Truthskr--precisely.

My wife and I bought in a large full-service co-op building back in August of 2014. The price was excellent (less than 790 per square foot) and the only thing we were worried about was that the maintenance was about $2.10 a square foot. It also offered unlimited subletting, with board approval from day one. However, after reviewing the financials we saw that about 52% of that was taxes and the building was otherwise on solid ground (local law 11 work had just been fully completed, the building had just switched to gas from oil and there were other capital improvements that had just been completed). The result: we have now been there 2 calendar years and there has been absolutely no raise in our maintenance. Put simply, just do the math and review the financials. If the numbers add up then pull the trigger.

LZ3 ... where is your building located ?

You can get a studio in a doorman building with less maintenance for the price you were going to pay, smart to have pulled out of the deal.