Co-op Reserve Fund

Rule of thumb on reserves is $400-$1000 per unit in the building. Whether reserves are adequate depends on what work the building may need to do in the future (hallways, lobby, boiler, facade, etc). Basically you could be at the low end of the range but if there is no work to be done, no problem.

check or have lawyer check board minutes for as far back as you can get--youll get a good read as to what will need attending to

there is somewhat of a "glass ceiling" of $1 million on reserve funds in most buildings that size. If the reserve goes above that, the FIND projects to spent it on. I think if anything, $800,000 reserve fund in a building that size is on the large size; but almost and indication that they are getting ready to do some major work, ESPECIALLY if they have hiked the mtc 20% since 2006. As Ubottom says - check to see what they are planning to do, because I'll bet they are stocking up for SOMETHING, because in general i don't see a 140 unit building raising mtc 20% to build a reserve fund of $800,000 just for shits and giggles, or being proactive in general.

GettingOt - I think the average is more like $1,000 - $4,000/per unit.

When you move out, do you get the reserve fund back for your apartment?

Another reason why assessments are better than mtc for capital improvements. People are SO irrational about assessments.

MKZL, no, and if your co-op has a flip tax, you get to add to the reserve fund.

my view has always been that keeping mntnce low should be a coop board priority--better to assess--higher price lower maintenance apts sell and value better, and trade more quickly than low price high maintenance--member how doggy the marty raines coops with huge underlying mtges were?--re condos, wait til all these abatements start to roll off--those monthlies will be scary--

Thanks to all for the comments.

I tend to agree with Ubottom in that a low maint/ higher price provides much more value than the opposite. Perhaps that is the driving factor in my concerns over this particular building. Recent cap-ex includes elavator upgrades, window replacement and Local Law 11 repairs, so without a flip-tax to build the reserves the maintenance makes a bit more sense. But given the almost random and constant increases that seem to plague most co-ops I fear this building approaching $2.00/ SF in no time. A review of the past 3 years minutes and financials do not uncover anything out of the ordinary so all of it really gets the mind spinning...

gutter86, that $6M mortage on a building with only 140 units seems high, but you'll have accounted for that in the purchase price. Assuming it's a standard mix of sizes. Not as if I've seen hundreds of building's financials, so I may be unrealistic. You might want to dig up a few similar buildings and check their mortgage numbers on ACRIS.

"Rule of thumb on reserves is $400-$1000 per unit in the building."
Absolutely not. I wouldn't touch a building with $1000 of reserve per unit. $3000/unit is prudent. $4000 is more comforting. Much lower and you can pretty much guarantee every little thing will result in a special assessment since the reserve cannot drop any lower without frightening people away. waverly is right on this one. 30yrs also makes sound points.

Isn't $4000 license to steal?

AMawani, I have no idea what you mean. A 140 Unit building with a $500,000 reserve fund is well-positioned to handle capital improvements without massive special assessments. New roof, boilers, windows, sidewalk vault, elevators, lobby/public space renovation, etc. A fund of that size may well result from proceeds of a flip tax over the years prior to the current slump. Most boards I have dealt with, contrary to the aprocryphal stories I see on hear from time to time, are fairly restrained and conservative. They owe fiduciary duties to the coop corporation and seek to maximize building value which benefits everyone. Spending down a reserve to leave only $150,000 is neither prudent nor attractive to prospective buyers--or most auditors.

Granted, there are different ways to structure a coop corporation's finances, but in lean economic times when most people surely would not welcome special assessments, a large reserve fund built during boom times can go a long way to reducing or minimizing special assessments.

Sorry, I'm absolutely losing my mind. I think working with #'s all day has made my mind jelly. $400-1000 is definitely wrong - no idea what i was thinking. The range for a mid-large building should be $2000-$5000 / unit.

Well the bottom line for me is that the numbers are not totally out in left field. The review has confirmed that no assesments have been implemented in the past four years and none are in the offering. To be within that 2000-4000 range, while being absurd in real dollars, is totally in line within NYC dollars - and that's what really matters now isn't it? Maintenance is what it is - which is akin to taking your money and throwing it in a fireplace so as long as it is what the rest of the "Jones's" are enduring, and I can handle it, then who am I too fight it...

the worst thing that i have seen is the low maintenance and high price offers. once you start looking through the financials and the minutes, you find out that there are heat assessments, improvement assessments, paying the staff assessments.

when the maintenance seems low, you really need to look at the financials prior to making an offer. there are plenty of buildings that are doing 10-15% heat assessments for 6 months. that adds up quickly.

you need to look at the big picture. if the maintenance is high, at least you know what you're dealing with.

What would be the reserve rule-of-thumb for small coops?
I am looking at a 50 units coop, with reserve around 150K ($3000 per unit).
Based on the above rule, it's okay.

The other thing that concerns me the most is that the bldg has 2.4mio mortgage, interest only, expires 2015. I think 2.4mio is high for this size.