Condo Association Management: Establishing Reserve Fund Contributions
Planned communities use reserve fund contributions to pay for unexpected expenses, such as storm damage, and expected expenses, such as the replacement of HVAC equipment. The need for a reserve account is easy to understand, but establishing what percentage of assessment fees should be put in the account can be challenging. Below are some helpful tips from condo association management providers about establishing reserve fund contributions.
Calculate How Much Equipment Will Cost to Replace
Part of the reserve account is typically earmarked for replacing essential equipment when it fails, such as air conditioners and furnaces. It will be necessary to determine how much it will cost to replace. In order to arrive at an educated cost estimate, be sure to establish a date when the equipment will likely need to be replaced.
Calculate When Equipment Needs to be Replaced
Calculating when equipment must be replaced is an essential step for establishing how much it will cost to replace. If the furnace in a building would cost $20,000 to replace today, don't forget to account for inflation and add the difference to the cost. With this done, you will know what percentage of assessment fees must be put in the account for replacing equipment.
Calculate the Repair Cost of Storm Damage
Part of the reserve account is also typically earmarked for repairing storm damage. One of the best ways to predict the cost of storm damage is to do a study of the cost of storm damage repair in the area of your community. Ideally, you should study the cost of storm damage in communities similar to yours. A condo association management provider will help you gather the data.
Explain the Need for Funding to Residents
After you have calculated the necessary amount of monthly funding for the reserve account, hold a meeting and explain the need for funding to residents. In some cases, monthly assessment fees may need to increase in order to provide the right amount of support. In this situation, having numbers that clearly establish the need for increased funding is essential.
Conclusion
Calculating how much equipment will cost to replace, calculating when it needs to be replaced, calculating the repair cost of storm damage, and explaining the need for funding to residents are four important measures for establishing a properly funded reserve account. If you community need assistance establishing a reserve account for replacing equipment and covering emergency expenses, contact a provider of condo association management today.
Calculate How Much Equipment Will Cost to Replace
Part of the reserve account is typically earmarked for replacing essential equipment when it fails, such as air conditioners and furnaces. It will be necessary to determine how much it will cost to replace. In order to arrive at an educated cost estimate, be sure to establish a date when the equipment will likely need to be replaced.
Calculate When Equipment Needs to be Replaced
Calculating when equipment must be replaced is an essential step for establishing how much it will cost to replace. If the furnace in a building would cost $20,000 to replace today, don't forget to account for inflation and add the difference to the cost. With this done, you will know what percentage of assessment fees must be put in the account for replacing equipment.
Calculate the Repair Cost of Storm Damage
Part of the reserve account is also typically earmarked for repairing storm damage. One of the best ways to predict the cost of storm damage is to do a study of the cost of storm damage repair in the area of your community. Ideally, you should study the cost of storm damage in communities similar to yours. A condo association management provider will help you gather the data.
Explain the Need for Funding to Residents
After you have calculated the necessary amount of monthly funding for the reserve account, hold a meeting and explain the need for funding to residents. In some cases, monthly assessment fees may need to increase in order to provide the right amount of support. In this situation, having numbers that clearly establish the need for increased funding is essential.
Conclusion
Calculating how much equipment will cost to replace, calculating when it needs to be replaced, calculating the repair cost of storm damage, and explaining the need for funding to residents are four important measures for establishing a properly funded reserve account. If you community need assistance establishing a reserve account for replacing equipment and covering emergency expenses, contact a provider of condo association management today.
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