At Chatel Real Estate, we manage many condo associations in the area, and we’ve been doing it for decades. There is quite a bit of financial planning that condo associations must do to protect the long term interests of the association.
It’s important for an association to have accurate and complete financial records. You are dealing with a lot of individuals within your association, and to keep all the accounts accurate, you want to take care of them on a monthly basis as well as an annual basis. You also need to file taxes every year. Condo associations are considered nonprofit organizations, and if the financial accounts are not tied out well, it can be an issue from a legal perspective.
Set up a realistic budget for your condo association. You will need to budget for general, ordinary expenses that are easy to project and you must also budget for any special expenses that may involve longer term maintenance repairs or larger projects. In addition to budgeting for expenses, you want to put at least 10 percent of your annual budget into a reserve fund. That reserve account should slowly build up in relation to an overall reserve study that is conducted for your association. Reserves will pay for things like a new roof to the building or a new elevator or any of those major projects that come along very rarely. When you have a reserve study done every few years, you’ll get a sense of how old those items are, and how much it will cost to repair or replace them. Once you have that information, your reserve account should match what you’ll need. When your reserves are strong, you don’t have to hit up your association for a special assessment for a new roof or some desperately needed repair.
That reserve account should build from long term contributions, but if you’re prudent and smart, you can also use the power of compound interest to reduce those long term costs. Contributions can be reduced when you invest them wisely.
There are many additional issues that condo associations must face when dealing with their financial planning. If you would like to talk more in depth about how we help condo associations keep themselves organized and efficient, please contact us at Chatel Real Estate, and we would be happy to talk to you.