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Our coop needs to raise 500,000 dollars over the next year for capital needs, and is considering doing it through an assessment, which would equate to approximately $400 per month for the average shareholder. Pros and cons?
It all depends on what the $400 is compared to the monthly maintenance. You have to consider the ability of your shareholders to pay that much more per month for a year. Our building had an assessment that amounted to about 20% of the maintenance for a 24 month period to cover major facade and terrace work. The 20% seemed to be the most we could charge before it became a problem for a number of people in our building. If the $400 in your building is more like 40% of maintenance then look at charging a lower amount for a longer period of time and put off the work if possible.
Hi Alfred,
I agree with Steve. But have you considered trying to cut costs instead of assessing? Do you have a marble polishing contract that you could cancel? Brass polishing? Motion sensors in hallways and basement? Can you bundle your Verizon bill? I know of a building that increased cash flow by $250,000 over the course of just two years by simple cost cuts that didn’t initially seem to be significant. Then, if you’re lucky enough that your building has a cellphone tower lease agreement, you might want to consider selling that for an upfront payment. Those sometimes go for over $1 mm. Contact my website: www.thecoopblog.com
How urgent are the capital needs, what are they? It sounds like a big burden for the average coop owner. Can the capital work be spread out over a few years, and do a $100 per month assessment? Some expensive items like elevator replacement, do one a year until done, roof replacement, possibly do a foam seamless roof on top of the old one, pointing, do the worst wall(s) first, top to bottom, then do the next worst the following year.
How many unit(apt) r in your building.
What boro are you in?
Are u using gas or oil
I am be able to give you some idea on getting huge tax credits. You maybe to get 20% or more depending on questions I asked
How many unit(apt) r in your building.
What boro are you in?
Are u using gas or oil
I am be able to give you some idea on getting huge tax credits. You maybe to get 20% or more depending on questions I asked
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Hi Alfred,
I am glad it is not more than $500k. I have noticed that co-op financing has become more difficult recently (even with a co-op like my own with a fully amortizing mortgage in the next 10 years [read mortgage free in 10 years] with great finances). Here are some quick thoughts.
Pros:
No interest to pay by getting a loan (less expensive)
Not reflected in the maintenance costs (easier to sell units)
Gets added to the shareholder cost basis
A single event – it can be explained away
Cons:
Your co-op didn’t save up ahead of time and earn interest in the process (missed income)
Means you are not getting a loan: loan interest is tax deductible (but you pay more)
Surprise factor: while everyone knows that an assessment is possible, do your shareholders know that one is probable?
Not knowing your demographic specifics, $4,800 for 12 months may be more than some folks are capable of paying
You may not get reelected
You will have to explain more (tends to heighten shareholder interest in what you are doing with the funds)
It sounds like you have approximate 100 units in your co-op. I would counsel holding a larger reserve fund so that doing an assessment for this amount would not be necessary in the future.
Best of luck,
Steve
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