Home Buying in Chicago>Question Details

Kevin, Home Buyer in Arlington Heights, IL

Healthy condo reserves?

Asked by Kevin, Arlington Heights, IL Wed Oct 12, 2011

Got the details on a particular condo I'm considering. I've listed some of the details below. Is this considered a healthy condo reserve amount? The building seems to be in good shape. Tuck point recently done, newer roof and no up coming special assessments or major maintenance in the immediate forecast. It looks like they put 10% towards reserve funding. Seems like the board runs a tight ship & is diligent in having monthly meetings. I was just curious as to whether or not this is considered healthy.

Details: 60 condo units
Cash reserves: 100K
Receivables: 100K
Total assets: 200K

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You still need to gather and give us more information. What kind of building is this: high-rise or mid-rise elevator building, or a low-rise or townhome complex? What is the exterior: brick, concrete, or a mix of materials? What is the age of the building? Have the windows ever been replaced? Are there common mechanical elements such as boilers and hot water heaters, or are those contained in the individual units? If the mechanicals are shared, what are the ages of each component? What is the assessment for the size of condo that you're considering...is it comparable to assessments in other units you've seen? Once you've reviewed this information, consult with your agent and attorney to determine if it's truly healthy and well managed.
1 vote Thank Flag Link Thu Oct 13, 2011
Use caution here. I commend you on doing your home work and taking time to understand the importance of a community governed by an HOA.

I suggest you obtain historical information related to the finances, going back 5+ years to current date. The history will give you a much better idea as to how things have been run by the Board/property management company. A Reserve Study of the community is most helpful if they have one on file. The study breaks out the costs of maintaining the community for the next 5-10-20 years. The community may look "healthy" today, however, if reserves are not monitored carefully it can be depleted rather quickly. Doing a litle more research will most certainly answer your own question. Good luck to you!
1 vote Thank Flag Link Thu Oct 13, 2011
You should look more closely at the receivables. These people may not be paying assessments that are used to take care of the property. Soon there mayl be a large legal bill to collect the outstanding debt, deferred maintenance. Find out the nature of those receivables and how old they are. Some of those receivables should be in the reserves.
1 vote Thank Flag Link Wed Oct 12, 2011
Thank you everyone for your answers! The building is FHA approved and my agent thinks that they are healthy based on what we've seen so far. She also advised me to ask my attorney for his opinion. I believe her but always like to get multiple opinions for something like this. The building seems to be well managed but I think we will be able to better determine that once we gain insight to the meeting minutes. Thanks again everyone!
0 votes Thank Flag Link Thu Oct 13, 2011
If the reserves are at least 20% of the current budget it should be fine. Typically, that is what FHA is looking for. Essentially 2 years worth of reserves. Is the building FHA approved? If so, that definitely will tell you that the financials are in order. If its not, I can help with that process.

Steve Stenger
President
Condo Approval Professionals LLC
0 votes Thank Flag Link Thu Oct 13, 2011
I would say it sounds ok, but 100k in reserves is not a lot for a building of that size.
Web Reference: http://AmericorpRe.com
0 votes Thank Flag Link Wed Oct 12, 2011
100K in a 60 unit building is not that much depending on how old the building is/type/ and other variables. You should get the past 12 months of board meetings to see what they have been talking about. How much do they contribute to the Reserve fund each year? You are required to receive 2010 and 2011 bedgets.
0 votes Thank Flag Link Wed Oct 12, 2011
Kevin,

If the information above is correct, this building seems to be well handled & healthy.

You can request recent meeting minutes if you haven't already...usually any upcoming projects are generally discussed in greater details there.

Best regards,

Urv
0 votes Thank Flag Link Wed Oct 12, 2011
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