Where to look first if you are unsure about the market rates for condominium management fees and repair reserve funds

When you own a condominium, the monthly management fees and repair reserve funds can sometimes feel like a slow-growing burden.

Especially in the case of investment condominiums, rental income, loan repayments, management fees, repair reserve funds, fixed asset taxes, and vacancy risks are all interconnected. Even if each one is only a few thousand yen, when combined, they can significantly change how your balance sheet looks.

I used to be on the sales side of investment studio apartments. That is precisely why I think that during the purchase explanation, topics like "monthly out-of-pocket expenses," "tax savings," and "future assets" tend to be highlighted. On the other hand, how management fees and repair reserve funds will change in the future, and how much they will affect you when you sell, are sometimes glossed over.

In this article, while looking at the market rates for condominium management fees and repair reserve funds, we will also work together to organize your feelings about whether you should continue to hold onto the property.

What you will learn in this article

• Average amounts for condominium management fees and repair reserve funds

• Guidelines for looking at repair reserve funds by price per square meter

• Reasons why management fees and repair reserve funds increase

• Perspectives for organizing whether to keep holding an investment condominium

Organizing the market rates for condominium management fees and repair reserve funds

The difference between management fees and repair reserve funds

Management fees are funds used for daily management, such as cleaning of common areas, caretaker duties, equipment inspections, and outsourcing fees to management companies.

Repair reserve funds are funds prepared for major future repairs, such as exterior walls, rooftop waterproofing, water supply and drainage pipes, and elevators.

How to view the national average

According to the Ministry of Land, Infrastructure, Transport and Tourism's 2023 Comprehensive Condominium Survey, the average management fee is 17,103 yen per month. Excluding amounts allocated from parking fees, etc., it is 11,503 yen per month.

The average repair reserve fund is 13,378 yen per month. Excluding amounts allocated from parking fees, etc., it is 13,054 yen per month.

However, this is the national average. It includes family-type units, studio units, newly built properties, and older properties. The average is not the answer, but rather a good starting point for looking at your own property.

Looking at repair reserve funds by price per square meter

It is easier to make a judgment about repair reserve funds if you look at them not just by the monthly amount, but by the amount per unit of floor area.

According to the Ministry of Land, Infrastructure, Transport and Tourism's Guidelines for Condominium Repair Reserve Funds, the average for buildings under 20 stories and with a total floor area of less than 5,000 square meters is 335 yen per square meter per month, with two-thirds of cases ranging from 235 to 430 yen per square meter per month.

For a 25-square-meter studio apartment, 8,375 yen per month is one benchmark. However, the required amount varies depending on mechanical parking, building scale, building age, and the number of facilities.

Factors that determine whether it is high or low

Management fees and repair reserve funds vary depending on the total number of units, facilities, building age, and management style.

Condominiums with fewer units tend to have higher management fees per unit because fixed costs are shared among fewer residents. If there are elevators, interior corridors, or mechanical parking, management and repair costs are also likely to rise.

The problem is not that it is high per se. What matters is why it is high, and whether it aligns with the management status and repair plan.

Reasons why price increases occur

Increases in repair reserve funds occur in many condominiums. This is because buildings get older, and construction and labor costs also rise.

In the 2023 fiscal year Condominium Comprehensive Survey, 36.6% of management associations reported that their repair reserve fund balance was insufficient compared to the planned balance in their long-term repair plan.

For investment condominiums, this directly impacts the balance sheet. Even if the 'monthly out-of-pocket expense' looks small at the time of purchase, the balance will change quickly if the repair reserve fund increases.

Do not judge based on market rates for condominium management fees and repair reserve funds

Notes on investment studio apartments

For investment studio apartments, management fees and repair reserve funds significantly affect monthly income and expenditure.

What you should look at is not just this month's income and expenditure.

• The possibility that management fees and repair reserve funds will rise in the future

• The possibility that rent will decrease

• The possibility that loan interest rates will change

• The burden of vacancies and restoration costs

• Remaining debt and net proceeds upon sale

Even if you were told it would be for "tax savings" or "a substitute for a pension" when you bought it, if you have taken out a long-term loan without understanding the numbers or risks, it is better to organize your finances once.

Items to check on your income and expenditure statement

It is fine to start simple. List your monthly income and expenses.

• Rental income

• Loan repayments

• Management fees

• Repair reserve funds

• Rental management fees

• Fixed asset tax and city planning tax

• Costs during vacancies

Try adding scenarios where the repair reserve fund increases by 3,000 yen, 5,000 yen, or 10,000 yen per month. Once your concerns become concrete, it becomes easier to see what to consider next.

Documents to check before selling

Even if you are considering selling because you are worried about management fees or repair reserve funds, it is better not to decide based solely on an appraisal price immediately.

The documents you should check are the management bylaws, the important matters investigation report, the long-term repair plan, the repair reserve fund balance, general meeting minutes, the loan repayment schedule, and the remaining debt amount.

Hearing a high appraisal price is reassuring. However, what is important is the price range at which it can actually be sold and how much will remain in your hands after paying off the remaining debt.

Changing management companies and reviewing interest rates

Selling is not your only option.

If management fees are high, there may be room for the management association to review the outsourcing details to the management company. If it is an investment condominium, reviewing loan interest rates or refinancing may reduce your monthly burden.

Of course, refinancing involves fees and credit checks. Decisions regarding taxes, contracts, and loans also require checking official information and consulting with experts.

How to approach market rates for condominium management fees and repair reserve funds

Market rates for condominium management fees and repair reserve funds are useful as an initial benchmark.

However, the market rate is not the answer for your specific property.

It is not as simple as saying it is bad because it is higher than the market rate, or safe because it is lower. What you should look at is why the amount is set that way, and whether you can comfortably accept that burden yourself.

What do you actually want to do with this condominium?

Do you want to keep it? Do you want to let it go? Or are you just not able to decide yet?

It is okay if you cannot explain it well. First, please check the process on the consultation-only page. It is not an application for sale, but an entry point to first untangle your current situation.