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Secondary Reserve Funds:  Preparing for Unforeseen Costs

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Photo by Skitterphoto on PexelsSitting on the Board of a cooperative or condominium is a big responsibility, maintaining property is costly, and managing the expectations of shareholders and owners is exhausting. Adding to the responsibility are unforeseen improvements and repairs. This is where the emergency reserve fund comes in handy. Secondary reserve funds give shareholders and owners peace of mind for unforeseen events that can often prove to be costly and require assessments. For buildings desiring this added level of protection, they should contact their accounting professionals or managing agents to assist with a reserve study.  The reserve study will explore standard operating costs and evaluate the lifespan of the building’s major mechanicals. It will also consider required improvements over the course of a five year period.  Typically, a reserve fund should cover three months’ worth of expenses.  Once the minimum is established, the emergency fund can be established.[1] Funds can be raised through refinancing in coops and loans in condos.

As with all things real estate, it pays to be prepared, and there is no better preparation than a healthy reserve fund supplemented by an emergency reserve fund.


[1]  Sidransky, A.J. (April 2019), Captial Reserve Funds – How Much Do You Really Need? Retrieved from The Cooperator https://cooperator.com/article/capital-reserve-funds/full#cut Accessed on May 10, 2019

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