Upping Your Co-op / Condo Reserve Fund: Six Savvy Solutions
April 19, 2010 — Reserve funds are important – if a roof leaks or your boiler suddenly expires, you should have emergency money available. That's Co-op / Condo 101. But there's another reason to focus on reserves: lenders have been rattled by the credit crisis and are zealously rewriting, tightening, and strictly enforcing rules. One of them is the requirement that co-ops and condos keep a certain amount of money in reserve – usually at least 10 percent of the annual operating budget or annual income from maintenance. When the amount falls below that, co-op boards can expect to hear from the bank.
So, maybe it's time you examined how you can restock your reserves. Here are just a few of the hidden assets that boards have turned into revenue that fattened their reserve accounts:
• Basements
Underground space has been converted into revenue-generating laundry and storage rooms. Some boards have renovated unused subterranean space and rented it out to commercial tenants.
• Roofs
Rooftops have been turned into terraces, with shares allocated for their use. Others have been rented to companies that install cell phone towers.
• Escheated funds
When boards change management companies, minor bank accounts sometimes get forgotten. If not claimed within five years, the money in such accounts is taken by the state and kept in a trust indefinitely. It's possible for a board to recoup this money, known as "escheated" funds.
• Sidewalk bridges The plywood facing above sidewalk bridges can be rented to companies that place advertising posters there. Some buildings have been known to erect sidewalk bridges even when there was no construction project scheduled – simply to generate quick income.
• Parking
The co-op board at the 88-unit Briarcliff (at left) in the Riverdale section of the Bronx realized that it owns a chunk of undeveloped land that could be turned into additional parking spaces – and a source of income for the co-op. The board approached the local community board with a proposal, and is now refining it while trying to win the support of neighboring buildings.
"We brought in an engineer and an architect to figure out how many outdoor parking spaces we could add to our garage," says board president Lee Moskof, a real estate broker. "We've been talking about this for years. It was a collective idea, without any one genius. There are only a handful of ways a board can raise money. Your options are very limited, so our board was all for this."
• Unused space
A 127-unit co-op in Lawrence, Long Island, turned an unused recreation room into a small gold mine.
"It was a ground-floor rec room that was getting used twice a year – for the annual meeting and the town hall meeting, maybe once in a blue moon for a birthday party," says Steve Greenbaum, director of property management for Mark Greenberg Real Estate. "I brought it to the board's attention that it was a great space that was going to waste."
The board renovated the space and turned it into a three-bedroom, two-bath apartment. They set enough space aside so they would still have a place to hold board meetings.
"It was great for two reasons," Greenbaum says. "We ended up selling the apartment for $600,000 and putting a substantial sum in the reserve fund. And now we get $1,200 in maintenance every month."
Adapted from Habitat April 2010. For the complete article and more, join our Archive >>