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There is a posting herein where the individual asserts raising maintenance is being “lazy”.
May I suggest that in a well run building, whether self managed or managed via a property management company, husbanding funds should be a way of life, de rigueur.
Thus, in a well run building, there are increases every year in maintenance fees (and perhaps assessments) to account for salary increases, utility increases, tax increases, insurance might be a bit variable and could even decrease if one is willing to front more of the deductible, preventative maintenance increases as the building ages.
To avoid increases is perhaps to invite insolvency.
To delay capital expenditures is perhaps flirting with disaster or at a minimum poor services to the residents, e.g.: lack of hot water, heat, leaky roof, etc.
To refinance is to condemn future owners to payments for improvements enjoyed by current residents. Not really fair when you look at it that way.
Remember, corporations borrow to create new or improved products and thus generate more revenue and produce more profits.
By borrowing, what new or improved products are generated that benefit the building / property? None!!
So why borrow? Why refinance?
Why pay interest expense that is of no value to the corporation (e.g.: building and owners)?
Think about it please.
This poster makes several good suggestions.
Looking at any given budget and property one can find from 5-50 ways to generate income or save on expenses.
there are energy consulting companies and the like that can assist you in finding and tapping these areas as well.
~AR
Budgeting for Economic Stability
I have not been on in a while and it is good to see some old/familiar people…
In light of some post that I am reading and recent conditions, I decided to post the following to assist some Boards with creating (modifying) their 09 budget
It is important for management when creating the budget to consider the posterity of the building.
Budgeting as most US households today, and as our government does by pushing financial responsibility into the future is irresponsible. We do not and should not EVER borrow to pay bills in our personal or business lives. (I have 2 buildings going debt/mortgage free this year!)
When creating a budget, all anticipated annual expenses are taken into account, based on the current years spending, announced water/utility increases, Taxes (future taxes can be obtained from the DOF website), regular expenses, anticipated salaries, and other expected expenses.
Additionally, the condition of the building and anticipated physical maintenance costs are important to factor in; most people become modest here, but do not be. It is a good idea to obtain an engineer’s condition report and a five year capital plan from a good engineer to assist in pinpointing this number. Forget the fact that fuel dropped, leave the number alone!
Once you have a solid list and sum of anticipated expenses, then calculate what your required income (maintenance) should be per share and add 5-7%. This should be your new maintenance
Hope this helps someone...
~AR
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You give a false dichotomy by saying that to be fiscally responsible, one must raise maintenance yearly. This is a clever debate tactic, but untrue.
One can be fiscally responsible without resorting to lazy (i.e. uncreative) maintenance increases / assessments.
A creative board will look at such revenue-raising options as selling unused common areas, creating basement storage, adding to existing rental parking spaces, signing up with film/TV location companies, leasing rooftop space to communications companies, etc.
(One can also cut expenses, though this is generally in such long-term ways as submetering, installing a condensing boiler -- see Habitat front pager today -- etc.)
Such inventive but labor-intensive thinking can mitigate or stave off an increase in a particular year. For these reasons, I agree with the previous board member that simply raising maintenance or issuing assessments is the lazy way out.
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