Every condominium has a condo reserve fund or at least they should. The developer is usually responsible for the initial contribution, but after that, the funding comes from the unit owners. The HOA condo reserve fund can be thought of as a rainy day fundbecause its purpose is to prepare for future repairs and upgrades.
When tasked with putting together or managing a condo reserve fund, the most common question is:
How Much Do You Need In Your Condo Reserve Fund?
There is no one-size-fits-all answer for how much money should be in your reserve fund. Factors like the age of the building and the number of units can be good indicators to adjust the figures. But there are a lot of other variables to consider. The type of amenities that exist at the condo is a big factor. Also, the type of construction as well as materials used for things like roofing will fluctuate from condo to condo.
Get the Building Assessed
A good starting point for determining likely future costs is to get the building assessed. Hire professionals to inspect your existing roof, doors, windows, HVAC system, and building. They can give you an idea of repair and replacement timelines and costs.
You can use this information to figure out how much you need to have available for anticipated repairs. Of course, there are always unpredictable events that can happen. Is your reserve fund ready for damage from severe weather like flash floods and storms?
Examine Report & Repair Request History
Past reports and repairs give a good picture of what sort of repairs are needed each year. The longer and more detailed the history, the better a picture you can put together of potential upcoming expenses.
You can figure out how frequently repairs are needed and how long they last. You can find patterns in past spending that can inform what your future spending may look like. Having a comprehensive condo management software tool can help with this.
These tools can help track condo service requests as well as offering maintenance tracking. This creates a reliable and easily accessible database of repairs and requests.
This is also important for tracking the status of current repairs. It helps to make sure problems are being solved in a timely manner, preventing them from worsening and becoming more costly. As well, it prevents double booking a job or repair.
What if There Isn’t Enough in the Reserve Fund
If there isn’t enough money in the reserve fund for predicted repairs and upgrades, you need to get out ahead of the problem. You need to increase the funds before they’re needed. No one is happy with a negative balance in the reserve. Fortunately, there are a couple of easy remedies.
Raise Condo Maintenance Fees
Although this isn’t the most popular move with tenants, condo boards are free to raise condo maintenance fees at any time. Every month a portion of the maintenance fees go towards the reserve fund, which makes up the bulk of the reserve fund.
By raising maintenance fees you can increase the contribution to the reserve. Increases in fees are expected over time as the cost of repairs and services increases.
Raise the Contribution to the Reserve Fund
The other option is to increase the amount of money from maintenance fees that gointo the reserve fund. This can be tricky as it’s important that you don’t go too far and lose funds you need for ongoing maintenance.
If taking this approach you likely need to find other ways to save money. Using automated property management softwareis a good option to save on expenses. It means tasks take less time to accomplish and require less manpower – the result, big savings.