Working Capital Fund for repairs

Started by ThomasV1 • 6 replies • 559 views

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ThomasV1 (New Jersey)
Posts: 2

Posted:

Hello, We are working to start a working capital fund that we want to start putting money in so we can make repairs pro-actively instead of always patching or making emergency repairs. Has anyone had success with this and explaining this to the rest of the association? Fro example we are on the beach so have rust issues, elevator that will need to be replaced etc and we are working to allocate funds towards this over the next few years. Please let me know your experiences. Thanks

JohnT38 (South Carolina)
Posts: 1,631

Posted:

Quote:

Posted By ThomasV1 on 03/11/2021 2:39 PM
Hello, We are working to start a working capital fund that we want to start putting money in so we can make repairs pro-actively instead of always patching or making emergency repairs. Has anyone had success with this and explaining this to the rest of the association? Fro example we are on the beach so have rust issues, elevator that will need to be replaced etc and we are working to allocate funds towards this over the next few years. Please let me know your experiences. Thanks

My suggestion is google "HOA Reserve Studies". There is lot's of good information available that explains the purpose and how they are done. Even if you are a very small community and chose not to pay for one you will learn a great deal about the subject.

KerryL1 (California)
Posts: 14,550

Posted:

JohnT is right, Thomas. Start your research as he advises.

Your HOA should have a reserve study done. There are professional reserve specialists who are certified or credentialed. It's even required in many states. Is there no reference to "reserves" in your governing documents??? Take a look.

With an elevator, it sounds like your HOA isn't too small. If you have a property manager or an HOA attorney, they can give you references.

KellyM3 (North Carolina)
Posts: 2,239

Posted:

Thomas,

There's great advice on this thread regarding a Reserve Study. Get one done.

Now...that said, expect that your monthly dues are too low to support your operations budget AND a Reserve Fund as you describe.

MichaelS56 (Minnesota)
Posts: 858

Posted:

What is your state law that pertains to having a Replacement Reserve for just the items that you listed. Our state requires "adequate" Replacement Reserve for those expenses and also requires a study done every three years.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Thomas,

Operational funds should be for yearly expenses.

Reserves are for expected maintenance, repairs and replacement of capital components (everything you identified).

See the following thread on this forum:

Subject: Reserve Studies/Funds 101 Note: some earlier links in the thread are broken but repaired later in the thread.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Regarding selling it to the membership, education is the best way - newsletter articles, meetings, etc.

Attached is an about reserves I wrote for our newsletter.

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