coop reserves

at least $4 million.

Allow me to provide a more verbose answer. Fannie & Freddie are now looking for condos, I believe coops to add at least 10% per year to the reserve. No single answer is right, the building should have conducted a reserve study so that this question can be answered intelligently. It really will depend on the age of the building along with a host of other factors..

oh...come on, you can do better.

flame us with a few youtubes.

post some endless, not on topic articles.

come on.

precious....

Not to sidetrack, but let's say that a bank decides not to grant a loan because of a condo building's insufficient reserve. Putting aside the question of whether you'd want to buy in such a building, is that the sort of thing that's worth talking to other banks -- or is every bank likely to have similar guidelines?

I think the minimum acceptable # in larger buildings is $2,000/unit, but the preferred # is $3,000-$4,000/unit.

What is the suggested reserve for a small co-op, like fewer than 10 units?
Thanks.

bump

it depends.... what is the condition of the building? what is the maintenance like? where is the building located?

i've seen 60 unit coops carry $50-70K of reserve in brooklyn with low maintenance and they were fine. i've also seen 100 unit coops carry $500K of reserve also in brooklyn with somewhat high maintenance and constant assessments.

Under virtually no circumstances should a coop of any size have under 6 months of operating expenses in reserve. More than that is prudent if major capital work is planned. Responsible coops may differ in their approaches to balancing special assessments, maintenance increases, and other income sources when developing a budget and long-term financial plans, so no particular formula can be used for every building. What I can say though is that the 6-month expenses rule is pretty well accepted in NYC as a base-level for reserve funds.

One general rule of thumb is that the reserve should be at least one-third of the annual maintenance charges.

while we're on the topic, what are suitable investments for co-ops who have at least a few hundred grand in reserves? other than short term cd's that barely beat inflation...

Thanks all!
ab: it seems to be in good condition, very low CC (tax abated currently in the EV).

I agree with Kylewest and prnyc..... Optimal reserve must be calculated as a percentage of annual budget. A minimum of 40-60% of budget seems prudent.

khd, typically, home inspections are not done on coops. since this is a very small coop, i would do a home inspection to ensure that everything is good working order. you then have to consider that if their reserve is low, you may have major assessments when something major needs repair and small assessments when minor things go wrong. i would expect tha this building does not have an elevator or full time staff, so that's less headaches the coop has to deal with. at the same time, you will reap the benefits of having very low CC.

In a small coop an inspection is fairly essential. The potential liability of an owner in a small building is increased many fold over a larger buildling so knowing what you are getting into is important. In a large coop with 100 units, for example, a $100,000 rebuilt of the sidewalk vault would cost each apartment owner about building $1000. In a ten unit coop, the vault would be smaller but say it still costs $50,000 to repair. That's a $5000 hit per owner or 10x as much. Same sort of math goes for the roof, furnace, facade work, etc. If you have the money and ability to absorb significant special assessments, then the increased risk of high special assessments in a small coop may be acceptable to you given whatever benefits you see in the building. But for many people, they simply lack the financial means to comfortably take on what living in a small 10-unit coop can cost.

Kylewest-Your comments are always so information packed. I so enjoy reading them. I sit on the board of a coop on lower fifth ave (you know the bldg) and boy, would we love to have you join us for one of our monthly meetings.

Uh...sorry. Not 10x--I meant 5x in example above. After broadbent's nice words I feel kinda dopey for that but math isn't my strongest subject.

And broadbent, I suppose one day I will go against my better judgment and wind up on a board again, but until then, I am a very happy sheep in the herd just pleased to attend the annual town hall meetings, read newsletters and vote for others to run things. I am graced with the good fortune to live in an extremely well-run coop without warring factions and a board that seems happy to keep doing the good job they've done. You have me very curious though about which building you are in down here....

thanks again, very useful!

kylewest-the emery roth....

broadbent, I can only imagine what a board meeting there must be like. Or how you get yourself to volunteer for that!

how many co-ops actuallt have real reserves and not a significant portion as an underlying mortgage?

Reserves *and* an underlying mortgage aren't mutually exclusive. When the mortgage comes due, you're not going to want to see a co-op use all its reserve to pay the mortgage down.

You will see co-ops that build up extra cash over the term of the mortgage and then use a chunk of reserve to pay off some/all of the mortgage at re-fi time, every five-fifteen years.

Others will get an amortizing mortgage and use that extra cash flow to pay it down month by month.

Either way, a co-op's still going to keep a reserve.