Monthly Maintenance

In non-doorman buildings, the maintenance charges are going to depend primarily on the size of the underlying mortgage and the tax assessment. Very roughly, I'd say anywhere from $1 - 1.75 per square foot downtown; less uptown because the tax assessments tend to be lower.

But financials have to be analyzed on a case-by-case basis:
* What's your share of the underlying mortgage?
* Is the building paying principal or just interest? At what interest rate, and when will the mortgage need to be refinanced? (Most are 10-year balloon loans.)
* What's your share of the building reserves?
* Does the building have any amenities that cost money to operate/maintain? (E.g., laundry room, roofdeck). Is there a full-time/part-time super?
* Are there major improvements planned? Are they funded?
* Is there a history of special assessments?
* How stable has maintenance been over the past 3 - 5 years?

It's a shame this information is not readily available and usually only surfaces after you have an offer accepted and significant money sunk into the process. But, if you're serious about a place, I'd insist on at least knowing the pro rata share of the underlying mortgage and a rough amortization schedule before making an offer. That's going to be the biggest factor/drag in non-doorman buildings.

Thanks a lot for your reply, lad! We have an accepted offer and are currently analyzing the financials for the past 4 years. The maintenance has been stable, but there has been a history of special assessments every one of those 4 years. I'm a bit worried about that. Also, the fiancials say that future improvements have not been assessed by the corporation, which I also find to be a bit of a red flag. But, the reserve fund is over a third of the annual maint; a whole lot of units are not on sale; and the building doesn't have amenities other than a laundry.

>Also, the fiancials say that future improvements have not been assessed by the corporation, which I also find to be a bit of a red flag.

Don't worry about that. It's just boilerplate. Every auditor's report says something like "The corporation has not estimated the remaining useful lives and replacement costs of the common property."

im in contract....my bldg has increased mtce about 4% per yr for the last 4 or 5 yrs.......i think thats considered average now in manhattan with tax increases, etc.....im budgeting that this will continue for years to come.......so those 1.5 per sq ft mtce charges will be over 2 or 3 per sq ft in the years to come....

should I be worried that the financials show a loss before depreciation and amortization?

n01, do you have a real estate attorney helping you with this process? It's very hard to answer questions without knowing the full details. (E.g., how much of a loss? Is it a loss for one year out of five? Four years out of five? Was there a special project like window replacement that contributed to the loss? How much were the special assessments? What was the reason for them? Would maintenance + special assessments still be reasonable?)

A lot of this may boil down to board philosophy, which is why you probably need someone with a full picture view to help you with this process. (I would not recommend posting too much identifiable information here, as you wouldn't want someone from the co-op board to see it.)

My building had ZERO maintenance increases over the past 3 years. I think increases are more a testament to how well run/corrupt/political the building is. Beware.

No more than $1-$1.25 per sq ft for non door-man coop for sure. Also, need to see what the average increases for the last ten year has been.

Aifamm: I can't think of any non-abated/non-HDFC/non-subsidized-in-some-way bldg that hasn't had its taxes go up annually over the last 3 years.

aifamm
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My building had ZERO maintenance increases over the past 3 years. I think increases are more a testament to how well run/corrupt/political the building is. Beware.

absolutely. the corrupt board in our building is completely responsible for those increases in heating oil costs. what a ridiculous statement you are making. in fact, if you haven't had increases in the past 3yrs, with increases in utility costs and property taxes, you should be concerned.

$1 - $1.25 per square foot is probably only realistic if the building has no underlying mortgage or a very small one -- at least downtown, it is.

As for all of the other issues on this thread:
* Would you rather have a 10% increase followed by 3 years of no increases or a 3-4% increase each year?
* Would you rather have no increase but a decrease in what goes to reserves?
* Would you rather have $900/month maintenance with an average of $1,200 in special assessments each year, or $1000/month maintenance with no special assessments in the near past?
* Would you rather buy a place for $800k with a $50k pro rata share of the underlying mortgage, or $825k with a $25k pro rata share of the underlying mortgage?

You end up in basically the same place either way. Which is better is more a question of philosophy than finance.

In a non-doorman building, you need to look at the realities (most of which you can at least ballpark prior to the offer) -- the underlying mortgage, the tax bills, upkeep, and whatever minimal labor is involved -- and assess whether the board is doing a reasonable job given those realities.

If the maintenance is high because of a bigger-than-average underlying mortgage, just adjust your offer accordingly -- assuming, of course, that the level of overall debt is appropriate for the building.

nyc10023: I'm just stating maintenance... not taxes, but in my case I am also abated.

printer: All I said is beware. If you think that a building that has annual maintenance increases is magically NOT going to increase because your broker tells you... then well i have a bridge to sell you.

1) Maybe the building leadership hasn't budgeted enough reserves to properly to take into account rising costs. Obviously you need to look on a case by case basis, but I would guess the general trend is stupidity/ineptitude/lack of budgeting/lack of planning/want amenities not realizing the cost/etc.
For instance, my building renegotiated some costs.
2) If you think there is no board corruption out there then... well no comment.

Then you're a condo - in which case, you should have said "carrying charges". I'm far from picky, but maintenance includes taxes (co-ops) and CCs in condos do not. Don't lump CCs, RET, mtce all together. Apples to apples. The OP was implying non-doorman co-op, in which case, mtce includes taxes and excluding some rare cases, the mtce will have increased annually over the last 3 years.

nyc10023: fair enough... i guess i was breaking it out in terms of what the board had some control over in terms of % increases... but I see your point the way i phrased my comment.

Bottom line, due your due diligence. I was in a shady building that didn't increase maintenance (carrying charges) and instead just had CONSTANT assessments claiming building repairs.

Hmm yeah right. I just used that opportunity to SELL before they actually increased the carrying costs, which would logically reduce my selling price. (There were also a host of other instances of corruption and bs)

I know that banks say that pro rata share of underlying mortgage (your share of underlying mortgage/purchase price) should be below 40%. That seems like a pretty high estimate to me. Any ideas of what this ratio should actually be on average or is for your apartments?

Are you sure they are defining pro rata share of underlying mortgage as your share of underlying mortgage / purchase price? Just reading the words, I would interpret it to mean your share of underlying mortgage / total underlying mortgage, in which case 40% would make more sense. (E.g., you could have one very large co-op in a small building where one person becomes responsible for a large chunk of the underlying mortgage and represents a danger.) Just a guess, though.

If the formula you listed is correct, I wonder if the 40% number you saw was from back in the day where co-ops may have cost $40,000 with a $16,000 pro rata share of underlying mortgage. I suspect the mortgage payment to maintenance payment ratio has risen over time.

On the listings we were serious enough to dig into, we found that our pro rata amount of the underlying mortgage represented somewhere between 2% and 6% of the price. (Plus one building that had zero underlying mortgage.) I suspect there were a few others that would've exceeded 6% that we excluded, as the maintenance was very high ($2 psf +) in no-amenity buildings.

Hope that helps, and hope your review is going well.

If a board doesn't raise maintenance over several years, then you've got something to worry about. It all depends on the state of the building, but with real estate taxes SOARING, there is no way around maintenance increases for many buildings unless they are putting off repairs or dipping into reserves. In most cases, periodic maintenance increases reflect reality. If you see a flurry of increases, it is usually because past board members ignored problems and the current board has to raise money to pay for things nobody anticipated.

Also, see if you can find out whether those special assessments were for particular capital improvements, or really are just avoidance.