Reserve fund: what is "healthy"

[ee2k]

What's considered a healthy reserve fund for a building? I am looking into buying a property that has 35 units but a reserve fund that has less than 100K in it. It's a mid-rise in downtown, has had some of the bigger work done (elevator, non-serious leak issues) but maintains such level of funds. Special assessments are there rebuild the fund, but not of large amounts (~$1000 per year.)

When do you say that a reserve fund is not "healthy"?

[Cos]

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[Sugarphreak]

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[canadian_hustla]

I work in the industry, around $2,000/door is acceptable

[s dime]

Originally posted by canadian_hustla
I work in the industry, around $2,000/door is acceptable :dunno:

[Kloubek]

Originally posted by canadian_hustla
I work in the industry, around $2,000/door is acceptable

I don't work in the industry, but imo $2,000 isn't anywhere close to acceptable. 1 mistake in the reserve fund study or a major unexpected issue and you're easily looking at a special assessment. In a previous place I had it turned out that the roof AND siding needed to be done literally decades prior to when the study told us. Everyone ended up with about $3500 in special assessments and it totally wiped out our reserve.

Cos has the right idea - although it can be very difficult to establish what "makes sense". First, check to make sure the study shows that all expected expenses are covered off without special assessments required. Then, don't assume the study is correct and factor in the potential of having to redo the siding or the roof, or something of that level of expense. If there would still be a reasonable reserve, then you'll probably end up ok. If you'd run into a special assessment, then obviously there wasn't enough available should a problem be encountered and as such you'd be playing with fire if you bought into such a place.

[Cos]

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[Kloubek]

^ Agreed. I've never personally come across a place that has millions in reserve for no particular reason but I'm sure the board could potentially mismanage funds in that manner as well. But even still, with that said - if a place had monthly fees that were too high I wouldn't buy there anyway.

[barmanjay]

I am not a condo doc specialist, but based on my experiences;

$5-7k per door seems to be acceptable.

[Cos]

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[JustinMCS]

You said each unit is assessed 1k per year for reserve fund contribution or is that in total?

What's the monthly reserve fund contribution from condominium fees? There should be something.

How old are the windows and doors? Are they corporation responsibility or owner?

Is there a courtyard? How old is the parkade membrane?

Are there post tension cables in the parkade or building? They should be checked every 2 years.

Look in the meeting minutes for any notes on leaking. Building envelopes are expensive!

Good luck!

[Weapon_R]

Look at the reserve fund study. It'll tell you what major renovations are expected. Once you see what is on the horizon, you can generally figure what your reserve fund should be. An older building with a lot of upcoming expenses will need a larger fund than a newer building with lots of life left.