New York's Cooperative and Condominium Community

Habitat Magazine Insider Guide



Explore Self-Funding for Capital Projects

Andy Ashwal
Executive Director,
KW Property Management & Consulting

Explore Self-Funding for Capital Projects

Setting the Stage

Many associations face large projects but often don’t know how to fund them. One option is a loan. Another option is self-funding. One association that we manage took the second choice. This association has 200 units and an annual budget of $2.4 million. The capital project they were looking at was going to cost $1 million, and the work needed to be done immediately. It was time-sensitive, and it was also weather-dependent. They didn’t have the option to wait. They only had $800,000 to fund the project, and they didn’t want to deplete their reserves beyond a point that was not comfortable for them, their accountant, or their managing agent.

What were they to do? Self-funding: the board went out to the community and asked people if they’d be willing to prepay 10 months of maintenance to raise the funds for the capital project immediately.

Following the Action

In such situations, there should usually be a “carrot” to attract the residents. There was. For those unit-owners who prepaid the 10 months, they got an additional month free. The board looked at an alternative option, as well: take out a loan. But there is a cost to obtaining capital – bank fees and an interest rate. The board treasurer determined, along with the accountant, that by prepaying 10 months of maintenance, it would equal out to the 11th month of maintenance being free. This was enough of an incentive for 10 percent of the residents, the number of unit-owners needed to make the plan viable. To find out if this is an option for your building, I recommend talking to your treasurer, accountant, and manager.

Doing It Right

It’s not an option for every building, but you should consider it. When cash is needed, it’s sometimes great to think outside the box. If you need to move swiftly, don’t look to the bank for a loan or a line of credit. Look to your community.

Subscriber Login

Ask the Experts

learn more

Learn all the basics of NYC co-op and condo management, with straight talk from heavy hitters in the field of co-op or condo apartments

Professionals in some of the key fields of co-op and condo board governance and building management answer common questions in their areas of expertise

Source Guide

see the guide

Looking for a vendor?