Planning for a rainy day—and the leaks that follow—is a common concern for many co-op and condo boards. Owners and managers know they need to prepare for short-term contingencies and longer-term repairs and upgrades, but the inevitable question is: How much should the building have in reserves?
While answering that question is more of an art than a science, there are some rules of thumb boards can follow to determine their building's needs. In a recent webinar, RAND and Wilkin & Guttenplan, P.C., a Certified Public Accounting firm serving the cooperative and condominium community, discuss how boards can plan for their building's future.
The first step discussed in the webinar is getting a capital needs assessment report that documents the condition of the building's operating systems and provides budget projections for major projects over the next five to 10 years—or longer. The report serves as a blueprint for long-term planning and helps boards and shareholders avoid unexpected assessments and sudden hikes in maintenance charges.
Other best practices include keeping capital reserves separate from operating reserves and never using long-term funds to pay for operating expenses. In addition, when it's time to undertake capital improvement projects, it's critical to make sure contractors submit sealed bids to ensure fair and competitive pricing.
The webinar also covers such topics as what's included in a capital needs assessment report, cash flow projections, acquiring a line of credit, refinancing debt, FHA guidelines, and developing an investment policy for the board to follow.
For more on capital needs assessments and long-term planning, check out the webinar, How Much Should Your Building Have in Reserves? (You can also download a pdf of the presentation.)
Preparing a plan of action will go a long way to securing your building's physical and financial health. Not to mention keeping you and your fellow residents dry during those rainy days ahead.
