Buyers underwrite the purchase price carefully and then treat common charges as background noise. Over a ten year hold, the monthly is often the bigger variable.
Four drivers.
Insurance. Building insurance in New York has risen sharply in recent years, and for a new tower with significant amenity and glass exposure it is a large line. It is also the line most likely to jump without warning at renewal.
Staffing. A full service building with a doorman, concierge, porters, and building staff is a payroll operation with union contract escalations built in. Amenity heavy buildings run more staff than their marketing suggests.
Unsold sponsor units. While the sponsor still owns a large share of the building, they are carrying a large share of the charges. As units sell, the allocation is unchanged, but sponsor behavior on the budget often is. Ask what percentage of the building has closed.
Reserves. A first year budget with a thin reserve contribution keeps the marketed monthly low. The board fixes that later, either with an increase or an assessment.
What to ask. The current budget versus the offering plan projection. The percentage of units closed. Whether there has been an assessment, and for what. The last two years of common charge history if the building is past its first year.
A rough planning assumption. Model common charges growing faster than general inflation over a long hold, and model the tax line separately using the abatement schedule. Doing both is the difference between a real projection and a nice story.
Our rent versus buy tool asks for the building's actual common charges for exactly this reason. Building level numbers beat market averages every time.
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