My complex has about $8k per units and we do not consider this level sufficient. We currently have:
• Capital Reserve Account
• Mortgage Escrow
• Water/sewer self escrow
• Real Estate Tax self escrow
• Insurance self escrow

Why self escrow? Well it has benefits for financial flexibility, earns interest on the accumulation of funds and saves costs. Here is a summary of our current funds:

The Capital Reserve is self explanatory and we have currently $650k in a segregated account.

Our mortgage agreement states that we maintain a separate reserve for mortgage payments equaling 10% of annual shareholder revenue (not including rental income). Its balance is currently $72k in another segregated account.

We save up monthly for the annual Water/sewer bill. We currently have $40k in a yet another segregated account for this purpose. This will need a lower balance if we can switch to quarterly billing.

We save up monthly for the annual Real Estate Taxes. This allows us to pay it off early (all at one time) and to take advantage of earnings on the accumulation of funds and the NYC discount for paying early. We currently have $100k in a yet another segregated account for this purpose.

We save up monthly for the annual Insurance Policy charges. This allows us to pay it off early (all at one time) and to not incur premium financing interest and fees. We currently have $11k in a yet another segregated account for this purpose.

The last three are considered operating reserves and we can draw on these funds at any time if necessary. If we do that though, we have to live with the fiscal consequences – like how do we make up the funds for when the payments are due. But sometimes buying time is all you need.

Having this many reserve & escrow accounts really adds to our financial flexibility, however, it is a bit of a complex structure. In my opinion, it takes a savvy management company to run this type of a set-up. All of these accounts are at Vanguard. If you want the management company we currently use, just e-mail me.

We also like to keep $45k in the operating account by December of each year to get us through the Jan – June lean months. We keep this account at a local bank (we don't assess the abatements).

Our audited financial statements can be found here: http://www.naborsapts.org/wp-content/uploads/2010/02/finst09.pdf