HOA Reserves

Started by AnnS9 • 10 replies • 1906 views

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AnnS9 (Nebraska)
Posts: 10

Posted:

Hello, my name is Ann. I have a question concerning HOA reserves.
I had an inspection done last Thursday for a condo and I told real estate agent later that evening I did not want this condo. It was built in 1965 and needed electrical panel box upgraded outside.
But, person who managed the location said the utility company takes care of this. I called the utility company and they said they only manage the usage panel, not a fuse panel outside. There is one fuse box inside and one outside which shuts off outside and inspector said it's 70 amp, needs to upgrade for 125 amp box inside!
Anyway, I did get to look at reserves and I could not believe it! This is for owned units with 13 units rented out. I guess they want to sell the rented units when the rental leases expire. Is this an absolutely pitiful report? This is the reason I walked. Thank you, Ann

INCOME
Association Dues 24,638.00 100.00 24,638.00 100.00
Interest Income 1.06 0.00 1.06 0.00

TOTAL INCOME 24,639.06 100.00 24,639.06 100.00

EXPENSES
Electric -26.47 -0.11 -26.47 -0.11
Less: Electric-Tenant -121.99 -0.50 -121.99 -0.50
Gas & Water 7,635.48 30.99 7,635.48 30.99
Grounds - Lawn Care 69.55 0.28 69.55 0.28
Grounds - Snow Removal 3,871.08 15.71 3,871.08 15.71
Grounds Maintenance -50.30 -0.20 -50.30 -0.20
Gutter Cleaning/Replacement -401.25 -1.63 -401.25 -1.63
Insurance 4,148.90 16.84 4,148.90 16.84
Lawn Care -12.75 -0.05 -12.75 -0.05
Legal & Professional 20.00 0.08 20.00 0.08
Maintenance 759.72 3.08 759.72 3.08
Management Fee 1,350.00 5.48 1,350.00 5.48
Miscellaneous Expense 13.50 0.05 13.50 0.05
Plumbing R&M 680.08 2.76 680.08 2.76
Repairs & Maintenance 443.28 1.80 443.28 1.80
Sign Expense 163.18 0.66 163.18 0.66
Snow Removal 2,625.00 10.65 2,625.00 10.65
Trash Removal 849.32 3.45 849.32 3.45

TOTAL EXPENSE 22,016.33 89.36 22,016.33 89.36

NET OPER INCOME/LOSS 2,622.73 10.64 2,622.73 10.64

CASH FLOW BEFORE ADJUSTMENTS 2,622.73 10.64 2,622.73 10.64

CASH FLOW 2,622.73 2,622.73

CASH ACCOUNTS Beginning Ending
Operating Cash 10,460.89 13,082.56
Money Market - Reserve 5,005.48 5,006.54

TOTAL CASH ACCOUNTS 15,466.37 18,089.10

LarryB13 (Arizona)
Posts: 4,099

Posted:

Ann,

Good for you! A fifty-year-old building in a harsh climate should be looking at major repairs and system upgrades yet they have only $5,000 in reserves. It cost me $6K to put a new roof on my home, so those reserves are not going to go far.

Just curious, but why are there two different line items for snow removal? I wish I could hire legal and professional assistance for $20.

DouglasK1 (Florida)
Posts: 2,046

Posted:

My understanding about the electrical situation is that the power company is responsible for everything before the meter and the owner is responsible for everything past it.

You mentioned 13 units rented, how many total units are there? In any case, luckily you found out the reserves were a joke before buying, they are probably in for some sizable special assessments.

Escaped former treasurer and director of a self managed association.

AnnS9 (Nebraska)
Posts: 10

Posted:

Larry,
I wondered the same about snow removal twice. The actual financial report is from Jan 2015-May 2015 and fortunately we did not have a lot of snow this year.
It seems they are upgrading new units as people are moving out. I don't see that listed, obviously buying a new stove, fridge, dishwasher and possibly carpeting from previously rented units are/will be coming from special assessments not shown here, but I think already are in place!
I'm questioning why owner moved out in January and put on market in March after living there short of 2 years!
I was told she lost FHA financing, but that expired in April this year not January!

AnnS9 (Nebraska)
Posts: 10

Posted:

Douglas,
I noticed after I posted I did not include 40 units for this location with 13 rented out. I tried to edit, but the site would not let me.
A new unit just opened up yesterday for sale online.
The financial report is from January 2015-May 2015!

DouglasK1 (Florida)
Posts: 2,046

Posted:

Quote:

Posted By AnnS9 on 06/12/2015 10:51 AM
Larry,
It seems they are upgrading new units as people are moving out. I don't see that listed, obviously buying a new stove, fridge, dishwasher and possibly carpeting from previously rented units are/will be coming from special assessments not shown here, but I think already are in place!
I'm questioning why owner moved out in January and put on market in March after living there short of 2 years!
I was told she lost FHA financing, but that expired in April this year not January!

Typically condo associations are not responsible for the interior of the units. I'm not 100% clear, but it appears you're saying the association owns 13 units and is renting them? If so, I would expect repairing the inside of the units to be done from rental income, not dues income. Do the financials you sent only include dues income, or is rental income mixed in there too?

Escaped former treasurer and director of a self managed association.

AnnS9 (Nebraska)
Posts: 10

Posted:

Yes, the association rents 13 units and the other 27 units are owned. As soon as the rented units lease expires, they are upgrading and selling online. Everything in the financial report is for 13 rented units and 27 owned units.
They are brick buildings and in good shape otherwise. But, I'm confused about rented units paying for anything, as they do not have the new French doors in place of sliding deck doors. You can see the updated units outside and some are pending sale online. I assume they have not have upgraded anything in the rentals.

DouglasK1 (Florida)
Posts: 2,046

Posted:

Are those financials only for one month or are they for dues only? I would expect annual rental income for 13 condos to be at least $100k. Hopefully the rent charged is enough to cover expenses and provide some profit, and that profit should be used to enhance those units. In any case, good that you bailed on it, I would be very wary of an association that owns and is renting 1/3 of the units.

Escaped former treasurer and director of a self managed association.

AnnS9 (Nebraska)
Posts: 10

Posted:

Copied and paste a better layout I hope:

Cash Flow (Cash)
January 2015 - May 2015 <<<< (really?! This is scary!)

INCOME
Association Dues 24,638.00 100.00 24,638.00 100.00
Interest Income 1.06 0.00 1.06 0.00

TOTAL INCOME 24,639.06 100.00 24,639.06 100.00

EXPENSES
Electric -26.47 -0.11 -26.47 -0.11
Less: Electric-Tenant -121.99 -0.50 -121.99 -0.50
Gas & Water 7,635.48 30.99 7,635.48 30.99
Grounds - Lawn Care 69.55 0.28 69.55 0.28
Grounds - Snow Removal 3,871.08 15.71 3,871.08 15.71
Grounds Maintenance -50.30 -0.20 -50.30 -0.20
Gutter Cleaning/Replacement -401.25 -1.63 -401.25 -1.63
Insurance 4,148.90 16.84 4,148.90 16.84
Lawn Care -12.75 -0.05 -12.75 -0.05
Legal & Professional 20.00 0.08 20.00 0.08
Maintenance 759.72 3.08 759.72 3.08
Management Fee 1,350.00 5.48 1,350.00 5.48
Miscellaneous Expense 13.50 0.05 13.50 0.05
Plumbing R&M 680.08 2.76 680.08 2.76
Repairs & Maintenance 443.28 1.80 443.28 1.80
Sign Expense 163.18 0.66 163.18 0.66
Snow Removal 2,625.00 10.65 2,625.00 10.65
Trash Removal 849.32 3.45 849.32 3.45

TOTAL EXPENSE 22,016.33 89.36 22,016.33 89.36

NET OPER INCOME/LOSS 2,622.73 10.64 2,622.73 10.64

CASH FLOW BEFORE ADJUSTMENTS 2,622.73 10.64 2,622.73 10.64

CASH FLOW 2,622.73 2,622.73

CASH ACCOUNTS Beginning Ending
Operating Cash 10,460.89 13,082.56
Money Market - Reserve 5,005.48 5,006.54

TOTAL CASH ACCOUNTS 15,466.37 18,089.10
INCOME
Association Dues 24,638.00 100.00 24,638.00 100.00
Interest Income 1.06 0.00 1.06 0.00

TOTAL INCOME 24,639.06 100.00 24,639.06 100.00

EXPENSES
Electric -26.47 -0.11 -26.47 -0.11
Less: Electric-Tenant -121.99 -0.50 -121.99 -0.50
Gas & Water 7,635.48 30.99 7,635.48 30.99
Grounds - Lawn Care 69.55 0.28 69.55 0.28
Grounds - Snow Removal 3,871.08 15.71 3,871.08 15.71
Grounds Maintenance -50.30 -0.20 -50.30 -0.20
Gutter Cleaning/Replacement -401.25 -1.63 -401.25 -1.63
Insurance 4,148.90 16.84 4,148.90 16.84
Lawn Care -12.75 -0.05 -12.75 -0.05
Legal & Professional 20.00 0.08 20.00 0.08
Maintenance 759.72 3.08 759.72 3.08
Management Fee 1,350.00 5.48 1,350.00 5.48
Miscellaneous Expense 13.50 0.05 13.50 0.05
Plumbing R&M 680.08 2.76 680.08 2.76
Repairs & Maintenance 443.28 1.80 443.28 1.80
Sign Expense 163.18 0.66 163.18 0.66
Snow Removal 2,625.00 10.65 2,625.00 10.65
Trash Removal 849.32 3.45 849.32 3.45

TOTAL EXPENSE 22,016.33 89.36 22,016.33 89.36

NET OPER INCOME/LOSS 2,622.73 10.64 2,622.73 10.64

CASH FLOW BEFORE ADJUSTMENTS 2,622.73 10.64 2,622.73 10.64

CASH FLOW 2,622.73 2,622.73

CASH ACCOUNTS Beginning Ending
Operating Cash 10,460.89 13,082.56
Money Market - Reserve 5,005.48 5,006.54

TOTAL CASH ACCOUNTS 15,466.37 18,089.10

DouglasK1 (Florida)
Posts: 2,046

Posted:

Thanks for the update, that apparently is just dues year to date. That would be about $125/mo dues. I have no idea what they are charging for rent, but assuming $800/mo/unit, that's over $50,000 of rental income. I wonder where and how they account for that?

Escaped former treasurer and director of a self managed association.

AnnS9 (Nebraska)
Posts: 10

Posted:

Thanks Larry and Douglas for your response, very much appreciated! Ann

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