Most People Moving Into 55+ Communities Don’t Hear About These Hidden Costs Until After the First Year

There are lots of things in life that increase after the first year. Your streaming bill, homeowners insurance, cable bills, and, of course, credit card APRs.

But one thing you don't necessarily expect to increase in year two is the place where you live. Unfortunately, for many people in 55+ communities, they don't realize that there are hidden costs lurking, ready to kick into effect after the first billing year. Sales offices will entice them in with one number, then it's a bait-and-switch when the number inflates the following year.

It's important to go in with the understanding that the base HOA is only a starting point, and costs will go up once concessions expire in year two. To keep more cash in your pocket, here's exactly what you need to know before you sign on the dotted line in a 55+ community.

Special assessments

In most communities, whether they're age-restricted or not, there are one-time special assessments when repairs and improvements are needed that go beyond what the community's reserves can cover. 

These assessments bring with them a non-optional charge that ranges from a few hundred dollars to thousands of dollars. It might cover a new roof or a major repair to a community's HVAC system in the common areas. 

These are necessary, yet they skyrocket monthly costs beyond what residents were expecting. And, in communities that are established, there may be major repairs on the horizon.

Amenity fees

Vibrant 55+ communities often have incredible amenities. There might be pickleball courts, a pool, or even fitness classes. These are what entice new residents and homeowners, but there's not always transparency around their costs upfront. 

If you find out that an amenity fee kicks in after year one, and it costs $200 a month, that's an extra $2,400 a year. And, for retirees on a fixed income, that's a major expense.

HOA fee increases

You sign on the dotted line with one understanding of what the HOA is. Will it remain that way? Probably not. 

It's not unusual for an HOA fee to increase 3 to 5% each year and, over time, that adds up. If your HOA is $500 a month, and it increases by 5%, that's $25 a month or $300 a year. Then the next year, that's an even larger increase. It keeps going up and up until it starts eating into your discretionary budget at a considerable rate.

CDD or bond assessments

The pool and the roads are necessary infrastructure and amenities that draw residents into 55+ communities, but these require significant funds to keep up. And to make sure they stay in tiptop shape, communities leverage Community Development District (CDD) or bond assessments. 

They're a type of special assessment, but they are geared towards infrastructure and common amenities rather than structural repairs. They're another necessary expense, but they add significant costs when residents least expect it.

Exterior maintenance expenses

If you move into a community in the fall, you might have no idea that there's a big expense looming next year. 

The exterior maintenance that keeps the community looking its best brings with it an added cost. This includes both the maintenance that you're required to perform on your own yard, if you have one, as well as added fees for the upkeep of the entire property.

Insurance renewals

Residents have little control over the insurance spikes that occur at renewal time. When a community's policy rises due to weather risks or the past year's claims, that cost gets passed along to residents via increased HOA fees. It's impossible to anticipate, and it can dramatically impact the monthly cost of living in the community.

Developer turnover

In some cases, where homeowners buy into a community while it's still under developer ownership, there may be a large increase in amenity costs once the property turns over. 

While the community is under developer control, those costs are artificially suppressed. The minute ownership turns over to the HOA, the full costs are realized, which impact the homeowners' bottom line.

Golf cart fees

Love the idea of zipping around in a golf cart, quickly getting from your residence to the pool to dinner? There's a chance there's a large fee looming. The sales office may not tell you that you'll have a fee to pay for using that golf cart, or you have to buy one yourself.

Prevent surprises through due diligence

Given all of these potential hidden costs, what's the best way to avoid a surprise? 

• Do your due diligence to understand the bigger picture regarding both fees and potential expenses. 
• Request a reserve study to understand exactly what the community's long-term and short-term financial health looks like. 
• Ask about insurance and property taxes. 
• Read through the HOA bylaws for a look at what's covered by your monthly dues and what's not. 
• Look over financial statements and recent board meeting minutes for mentions of upcoming repairs or assessments. 
• And, lastly, consider recent sales so you have a full view of resale potential. The age restriction on these communities narrows the buyer pool, and that can impact you if there are empty units and a large assessment comes up.

Bottom line

Living in a 55+ community is a great choice for many people, but you can protect your home budget by understanding exactly what the expenses will be after the first year. Look carefully not only at your monthly mortgage and whether it fits comfortably into your budget, but also the other costs that will add to that bottom line after year one. 

Conduct a budget stress test of the maximum number you could potentially pay, and make sure that number feels doable for you. If it doesn't, it's time to reassess whether this move is the right one to make at this time.

This article is for informational purposes only and should not be considered investment advice.

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