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Assessments and Reserves

Every home on the planet needs maintenance, repairs, upgrades, renovations and improvements over time. No property is immune from this.  Every homeowner knows that when a roof needs to be repaired, it's wisest not to delay..... keeping a reserve fund for these inevitable costs is essential, whether a single family home or an apartment building.
 
 
Owners of homes have two options as it relates to funding bigger cost items: either you build up a 'savings account' of sorts by adding a bit extra each month into the kitty to create a reserve fund, or you keep in the back of your mind the knowledge and certainty that at some point you will have to fund a bigger expenditure another way. In condo's and co-ops that is done via an assessment....eg: A $1 million facade repair is split amongst 100 apartment owners so that each pays a percentage of that cost based on the percentage of the building they 'own' based on their offering plan or number of shares.
 
 
Sometimes these costs are financed, adding to a monthly ongoing repayments/financing cost. Sometimes they are charged in one lump sum. And sometimes the HOA offers a payment plan whereby the cost is spread out over several months or even years. Many buildings around the US are facing bigger assessments as buildings age. Delayed maintenance and upgrades is often more expensive. All homeowners should factor this inevitable cost into their home costs budget. Almost all capital improvements increase the value of a property, and almost all of them can be added to your cost basis so they could have tax benefits down the road upon resale.
 
 
Many HOA's struggle with owners who cannot afford to pay large assessments: these challenges are often resolved with creative financing options. Sometimes other owners in a building may fund those unable to pay and accrue interest over time that is then repaid upon the resale of that unit. There are almost always (creative) solutions to money problems.

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