Underfunded Reserves – the $10 Solution!

In a recent webinar, an attendee remarked how simple it seemed to get on the path to appropriate Reserve funding. They were right! The problem of underfunded Reserves in community associations across the country can eliminated in five years with the $10 solution. Follow along as I explain.

We’ve found most associations fear that making responsibly sized Reserve contributions means a big increase, and they fear it will be enough of a change that it will increase their delinquencies. It doesn’t have to be that way.

Can your association afford to raise its budgeted assessments by $10/month per owner this coming year? I think so. Here’s the plan. Take each owner’s additional $10/month, and add it to your Reserve contributions. Then next year, do it again. If necessary, do it again, and again. It would be a rare association that after four or five years, with $40 or $50/month more going towards Reserves than just a few years earlier, wouldn’t be funding their Reserves adequately.

Most condo associations need to be contributing $30 – $100/mo per owner towards Reserves (depending on their construction style & amenities) to offset ongoing deterioration. Most associations are underfunded, and that’s because their Reserve contributions have historically been less than needed. Underfunding is bad because it leads to special assessments, deferred maintenance, and lower property values.

So start moving your association in the right direction, chipping away at your “underfunding” problem. A $10/month change can make a big difference. Take it one year at a time. That’s the $10 solution!

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