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#7956
Berni ()
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Reserve Funds for 145-unit roofs ..... 2010/10/12 17:59  
Hello forum members,
I am one of the 5 new Board members of a 145-unit freehold housing project and we are all fairly new at this, learning as we go along. I hope that my question is welcome in your circle! I have found much information for us on this forum since we follow many of the guidelines of Condo's.

We are forecasting for the 145 new roofs needed in approx. 12 years but my question is ... do most of you estimate and reserve sufficient funds for all the roofs to be done at one time? If so, that would mean that we would require near $1-million at that time.

Are we correct in our forecasting and if so, that is an awful lot of funds to be keeping in a savings account, isn't it? ... not to mention the interest it would generate which I assume is taxed income.

Any help to point us in the right direction would be great!

PS ... we do have a Prop. Mgr.
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#7957
Roger ()
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Re:Reserve Funds for 145-unit roofs ..... 2010/10/12 18:22  
Hi Berni,

No, you don't have to have all the money in advance. This kind of project does not get completed overnight anyway.

The engineers should have given you various options of the required cash flow that would cover the roofs replacement. Usually the Board is negotiating the financing options based on:

1. Technical requirements (the scope and urgency of repairs),
2. Ability to finance the project(s) by owners,
3. Options to finance the project(s) from the current reserve fund, loans, operating budget surpluses or special assessments.

Hope this helps.
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#7991
Re:Reserve Funds for 145-unit roofs ..... 2010/10/14 20:05  
The interest is not taxed -- you are a not for profit corporation!

If your town homes are in blocks you have an easy way to spread out the task, and not empty the fund.
Richard Forster
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#8023
Berni ()
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Re:Reserve Funds for 145-unit roofs ..... 2010/10/17 11:40  
Thank you Roger and Richard.
Our units are in blocks of 14 to 18.

What would be a comfortable time frame to spread out such a project? We were thinking doing all of the roofs in a 5-year time frame.

thanks again!
Berni
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#8029
Can They Live With It?? 2010/10/17 12:25  
Ask your owners...

They will be happy to tell you what they can live with, since it not a do or don't do deal.

The art of the information meeting can smooth it all, and save the stress, and the removal meetings along the way!

Sometimes the best answer is "can we live with it", when creating plans and solutions to expensive decisions.
Richard Forster
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#8031
Berni ()
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Re:Can They Live With It?? 2010/10/17 13:46  
Excellent idea Richard! Thank you! We will put that forth in our next AGM!

Best Regards,
Berni
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#8040
Re:Can They Live With It?? 2010/10/17 17:47  
NO -- never, put that on your AGM agenda.

Have a separate "information" meeting, on that issue alone.

If the don't like what they hear at and AGM, somebodys head will roll (too).
Richard Forster
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#8042
Berni ()
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Re:Can They Live With It?? 2010/10/17 17:52  
Ok! ... got it! Thanks!
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#8048
Re:Can They Live With It?? 2010/10/17 19:19  
Unless the board is making a sacrifice to the owners....
Richard Forster
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#8050
Re:Can They Live With It?? 2010/10/18 11:38  
There should be a Town Hall Meeting just about this item. The agenda would be:

- Explanation of the technical situation
- Financing options.

Bernie, make sure that the Board is well prepared for the meeting. Before, and at the meeting try to understand what would be the preferred choice of the majority of all owners. Then the Board will have to make a decision based on available options/trade offs.

You should invite the engineer, at least for the first part of the meeting.
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#8054
Re:Can They Live With It?? 2010/10/18 13:59  
That what they are called --- Thanks Robert!

The purpose of the meeting is to clarify and enlighten, and from that the board can move to their role as planners, not reactionaries!
Richard Forster
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#8056
Roger ()
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Re:Can They Live With It?? 2010/10/18 15:08  
Hi Bernie,

One more thing that is very important: after you decide about the technical solutions, timing and financing option, make sure that the Board proceeds with the proper tendering process. Don't let anybody else to control it.
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#8196
Duncan ()
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Re:Reserve Funds for 145-unit roofs ..... 2010/10/28 15:20  
Hello Berni,

Here are a couple things you may want to think about.

What is your total condo fee revenue amount?
What amount of that goes to the Reserve Fund?
What minimum amount have the BOD set for the Reserve Fund Balance?

You should always have an "emergency balance" like this...
$1. - $300,000. for catastrophic emergencies - fire, flood, etc. (never use this except of true emergencies -- it is your safety-net. A good rule of thumb is... this amount should equal the market value of one/two condo units.)

Your "working balance" is above that amount.
$300,001. - $800,000. for regular Reserve Fund projects.
That gives you a 1/2 million to conduct regular RF projects each year.

(You should do the same for your general expense account too. You pick the numbers. Extra snow or a pipe break can cost you tons from your general expense account.)

Too many folks in condos have a self-defeating attitude of.. "we have little or no money." This is completely false. (What home owner wouldn't like to have: A) the revenue your Reserve Fund gets every year; a 1/2 million in the bank for repairs/replacements?)

Try to use only about 2/3 of your "working amount." The balance may/will bring in enough "interest" to cover a yearly cost of living increase and help reduce condo fee increases.

These figures can vary with the size of your condo and what the BOD deems reasonable given the condo age and projects to do. It is not unusual to have $2 million in the Reserve Fund for larger condos.

Also, be aware that spreading a project over 5-10 years is NOT cost effective. If your engineer recommends this type of time-line -- find another engineer -- fast. Focus only on one major project each year. This reduces work for everyone and leaves you with sufficient funds to do one or two small replacement projects -- and limit yourself to only 1-2 of these. Projects should be completed as quickly as possible to take advantage of economy of scale.

As well, owners get upset if some owners got new windows last year and others have to wait 2-3 more years. Strive to complete all projects within 1 year, 2 years if necessary; 3 years at the absolute worst. Remember... prices, sizes, colours, styles, and product lines change or are discontinued. You don't want to have 3-4-5 different items when you want consistency. Also, having warranties for various units/buildings spread over 5-10 years is a total nightmare! .. and makes replacement next time even more difficult!

Understanding and implementing best business management practices and good project management practices are keys to good condo governance. Saves time, money, workload and headaches, and reduces missed opportunities.
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#8197
Duncan ()
User Offline
Re:Reserve Funds for 145-unit roofs ..... 2010/10/28 15:21  
Hello Berni,

Here are a couple things you may want to think about.

What is your total condo fee revenue amount?
What amount of that goes to the Reserve Fund?
What minimum amount have the BOD set for the Reserve Fund Balance?

You should always have an "emergency balance" like this...
$1. - $300,000. for catastrophic emergencies - fire, flood, etc. (never use this except of true emergencies -- it is your safety-net. A good rule of thumb is... this amount should equal the market value of one/two condo units.)

Your "working balance" is above that amount.
$300,001. - $800,000. for regular Reserve Fund projects.
That gives you a 1/2 million to conduct regular RF projects each year.

(You should do the same for your general expense account too. You pick the numbers. Extra snow or a pipe break can cost you tons from your general expense account.)

Too many folks in condos have a self-defeating attitude of.. "we have little or no money." This is completely false. (What home owner wouldn't like to have: A) the revenue your Reserve Fund gets every year; a 1/2 million in the bank for repairs/replacements?)

Try to use only about 2/3 of your "working amount." The balance may/will bring in enough "interest" to cover a yearly cost of living increase and help reduce condo fee increases.

These figures can vary with the size of your condo and what the BOD deems reasonable given the condo age and projects to do. It is not unusual to have $2 million in the Reserve Fund for larger condos.

Also, be aware that spreading a project over 5-10 years is NOT cost effective. If your engineer recommends this type of time-line -- find another engineer -- fast. Focus only on one major project each year. This reduces work for everyone and leaves you with sufficient funds to do one or two small replacement projects -- and limit yourself to only 1-2 of these. Projects should be completed as quickly as possible to take advantage of economy of scale.

As well, owners get upset if some owners got new windows last year and others have to wait 2-3 more years. Strive to complete all projects within 1 year, 2 years if necessary; 3 years at the absolute worst. Remember... prices, sizes, colours, styles, and product lines change or are discontinued. You don't want to have 3-4-5 different items when you want consistency. Also, having warranties for various units/buildings spread over 5-10 years is a total nightmare! .. and makes replacement next time even more difficult!

Understanding and implementing best business management practices and good project management practices are keys to good condo governance. Saves time, money, workload and headaches, and reduces missed opportunities.
  The administrator has disabled public write access.
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