Many people looking for homes in Baton Rouge often ask why there is such a difference in management fees between condos and townhomes. From my long-term observation of the local market, this question requires an understanding of what management fees are used for.

The median HOA management fee in East Baton Rouge Parish, where Baton Rouge is located, is around $220 per month. In typical residential communities, such as those similar to townhomes, fees usually range from $50 to $150 per month, while places with amenities like pools or gates can charge between $150 and $400 per month. In contrast, condos often have higher management fees than townhomes, even in the same area, because the fees cover the maintenance of the entire building, including the roof, exterior walls, elevators, and common hallways. In one case I reviewed, a nearby townhome had a fee of just over $100 per month, while a similarly sized condo exceeded $300 per month. This difference ultimately arises from the varying responsibilities for building maintenance.

HOA fees are used for exterior maintenance, master insurance, operation of common facilities, landscaping, trash collection, and contributions to a reserve fund. Buildings with insufficient reserve funds may impose special assessments on residents when major repairs, such as roof or plumbing work, are needed. Currently, Louisiana does not have a law mandating reserve fund contributions or reserve studies. Florida has made reserve fund contributions mandatory following the Surfside condo collapse, but Louisiana still leaves it to the governing documents and board decisions of each building. Therefore, it is even more important to review the financial statements of properties in this area.

When I consult with clients, I always highlight the following items to check:

• Items included in the management fee and any separate charges
• Recent reserve fund balance and history of special assessments
• Rules regarding rentals and pets

These items can usually be requested from the agent when viewing properties. Additionally, mortgage lenders also assess the overall financial health of the building, including delinquency rates, reserve fund ratios, and any lawsuits, so buildings that do not meet the criteria may be classified as non-warrantable condos, making loans more difficult to obtain.

From my long-term observations, people moving to Baton Rouge from other states are often surprised that home prices are lower than in their previous areas, but what they really need to pay attention to is the structure of property taxes and insurance costs. Louisiana has a property tax reduction program called the Homestead Exemption, which can benefit actual residents, but condos also incur separate monthly management fees that need to be factored in. Given the humid climate, issues like mold or roof maintenance are frequently mentioned, so it's good to check if management fees include pest control or roof inspections.

For families looking for preferred school districts, school ratings can vary significantly from neighborhood to neighborhood around Baton Rouge, so while it's helpful to refer to GreatSchools or state education department ratings, it's important to verify the exact assigned schools for any condos of interest before purchasing, as school boundaries often change.

Investors considering rental income may find the steady demand for rentals near college campuses attractive. However, there are no guarantees for rental income, and it's essential to develop the habit of calculating the actual yield after deducting management fees, property taxes, and insurance costs. In areas like Baton Rouge that are at risk of flooding, flood insurance is also an important item to check separately.

What I've learned from observing this market for a long time is that a property with low management fees is not necessarily a good deal. In fact, a building with appropriately set management fees and a steadily growing reserve fund can be a more stable choice in the long run. This article is not investment or legal advice, and I recommend reviewing financial statements with a professional before making any actual contracts.