Reserve Fund Study?

[joylewis.livejournal.com]

Hello all--my Google queries have been fruitless so I'm hoping someone here has a recommendation. My condo association would like to do a reserve fund study. Has anyone here done this that could provide experience or references? 

Thanks! 

Comments

[laryu.livejournal.com]

I sort of went down that road seven years ago, when I was trustee of a condo association that had just formed. Unfortunately, I don't have a cut-and-dry answer for you, but here are a couple things we considered:
* Benchmarking reserves against comparable condos. It helps here to be working with a management company. You can benchmark relative to combined condo value or as a % of your annual budget.
* Looking at the cost of replacement of major systems and amortize over their expected life. So, for example, roof replacement of $10k over expected life of 20 years. Boiler replacement of $20k over expected life of 25 years. Etc. Total it up, and that's one way you can estimate a set-aside for reserves. But you'll need to know something about renovation cost estimation to do this.

We started going down both paths but ultimately we didn't do anything as formal, for several reasons. First, we basically had no reserves and not set-aside, so we didn't need to know the final reserve figure to know we had to raise fees and start putting something aside. Second, in the absence of substantial reserves, it's not uncommon to either take a loan or make an assessment to deal with the actual replacement of one of those systems. A few years later, that's indeed what we did, twice, for a lobby renovation and when our boiler sprung a leak.

Hope that helps.

[joylewis.livejournal.com]

Thanks--that's useful. What I most need is someone to evaluate those renovation costs and give an estimated timeline for when they might occur. I've also seen the estimate of having $2000-$3000 in reserves for each unit, or $500 contribution per year per unit. In the interest of avoiding assessments, we'd all feel more comfortable having a sense for what big expenses might be hitting when. (Interesting conundrum, too--building was built in the 1800s but gutted and rehabbed in the last 10 years, so all the books written for Californian condo associations don't really apply. ;)

If you're still on a condo board, I found an interesting website: http://www.condopedia.com/

[alstnprkngrfuge.livejournal.com]

There are a whole lot of old buildings that were converted to condos around the Boston area, so maybe there are some relevant resources. Books aimed at small landlords could also help.

Is your building self-managed? If so, how do you handle finding contractors for repairs (or is that part of your question)? I'd like to find out what typical budgets for small condos look like, both self-managed and professionally managed.

[joylewis.livejournal.com]

We are self-managed. Some contractors we maintained from when the building was rehabbed, but most we've found elsewhere. Tom Champion (bless his heart) actually gave me references here in DSLJ about good masons in the area. References from friends and neighbors and plain old google fill in the gaps.

I'm not sure what you mean about the budget; are you talking about how much we pay for water, insurance, etc. or are you talking more about planning for repairs?

[laryu.livejournal.com]

How many units are in your association? Your fees should be set according to a budget, that includes line items for Income (condo fees, other fees, bank interest, etc.), Operating expenses (electricity, utilities, etc.), Maintenance expenses (for various types of maintenance and supplies), Administrative expenses (management fees, like tax prep), Taxes and Insurance -- and Capital Reserves/Expenses.

[alstnprkngrfuge.livejournal.com]

Basically, I'm interested in finding out what smalls condos similar to ours are paying for, and how much they're spending, so I can see if our expenses are too high.

[laryu.livejournal.com]

That's a great reference! Thanks, although I'm not in a condo anymore. Avoiding assessments is more palatable, but we were looking at some big numbers and starting our reserves from 0, so it just wasn't going to happen. For what it's worth, our ballparking ended up relatively close to your rules of thumb. For a renovated 1800s brick building with 15 residential and 2 commercial units, we changed our budget to set $10k aside per year. If you want more details, we can take it offline.

You might call a home inspector for the reserves study. Not sure who else would conduct one.

Reserve Fund Study

[sponja2000.livejournal.com]

The act will require condominium corporations with more than 10 units to have or complete a reserve fund study. This study will define the reserve fund required for that corporation, and help determine the budget for current and future maintenance or repairs to the buildings. As well, these corporations must submit annual financial statements to the director of condominiums at Service New Brunswick, ensuring that every condominium owner is kept appraised of its corporation’s financial status. Reserve Fund Study (http://www.ben-engineering.com)