Obviously, purchasing a penthouse is going to put a decent-sized hole in your wallet, no matter how much you’re worth. Beyond the sale price, though, there are some extra costs you probably hadn’t considered.
Here’s what you might (potentially) be looking at:
1. Homeowners association (HOA) fees
Penthouse HOA fees are typically much higher than standard units, ranging from hundreds to tens of thousands of dollars per month. The fees cover shared building expenses including maintenance of common areas and amenities like pools, gyms, doormen, and concierges, as well as contributions to reserve funds for future repairs and improvements. Penthouse owners pay the highest fees in the building due to their larger size and higher ownership percentage, which is usually how the fees are calculated.
2. Property taxes
Property taxes for penthouses are significantly higher than standard units due to their elevated assessed value, often totaling thousands of dollars annually and sometimes running into thousands monthly. These taxes are calculated based on the assessed property value and local tax rates, with penthouses bearing the highest burden in any building due to their premium status. The substantial tax burden contributes to local infrastructure and public services, making it one of the most significant ongoing costs of penthouse ownership.
3. Homeowners insurance
Penthouse owners need an HO-6 “walls-in” policy that covers the interior, upgrades, possessions, and liability, with premiums significantly higher than standard units due to greater property value and potential liabilities. Higher coverage limits are recommended because of the potential for extensive damage to units below in case of incidents like burst pipes or flooding. Standard policies often don’t adequately cover outdoor spaces, artwork, or luxury fixtures, requiring supplemental coverage such as umbrella insurance or high-value home insurance to protect against the unique risks and valuable contents typical of penthouse living.
4. Unique building features
Penthouses often include special amenities that require additional maintenance costs. Private elevator access typically comes with higher maintenance fees, while responsibility for roof-related issues often falls to the penthouse owner. Unique HVAC systems designed for larger spaces and multiple exposures require specialized maintenance that standard building systems don’t need. High-end finishes and custom features throughout the unit cost significantly more to maintain and replace compared to standard materials found in typical units.
5. Special assessments
Penthouse owners face higher exposure to special assessments due to their larger ownership percentage in the building. When major repairs or improvements are needed, such as elevator upgrades, facade work, roof repairs, or structural improvements, penthouse owners bear a disproportionate share of the costs. These assessments can be substantial and unpredictable, sometimes reaching tens of thousands of dollars depending on the scope of work and the building’s needs.
6. Transfer/luxury taxes
In certain regions like New York or Los Angeles, penthouse purchases may be subject to mansion taxes or transfer taxes on properties above specific price points. These luxury taxes represent additional one-time costs that can add significantly to the purchase price. The tax burden varies by location and property value, but is an important consideration in high-value markets where such taxes are implemented.
Honorary mention: Opportunity costs
While not an actual cost to your bank balance, the substantial capital required for penthouse ownership represents money that *could* be invested elsewhere, creating an opportunity cost that should be considered. The reduced liquidity of having so much capital tied up in a single asset limits flexibility for other investment opportunities and can impact overall portfolio diversification strategies.
Is it worth it?
Yeah, I’m biased, but I believe penthouses are absolutely worth their added costs. The same way it’s more expensive to reside in California compared to other states (taxes, cost of living etc.) there are tradeoffs to consider with everything in life. Penthouses are no exception. And it’s still worth it.