I'm purchasing a condo and trying to evaluate if the association is financially healthy. Are there any red flags in this balance sheet or income statement? There are 200 units and utilities are included in the monthly assessment (around $600 - $900 per unit, depending on size). The numbers below are in all thousands.

What does it mean if unappropriated members' equity is negative but reserves are positive? Is this like robbing Peter to pay Paul? Doesn't the money for maintenance/repairs/improvements come from both of these accounts anyway (depending on the amount or nature of the work)?

balance sheet

income statement

  • See communityassociationmanagement.com/c33-financial-matters/… Recommendation D.
    – RonJohn
    Dec 24 '19 at 16:22
  • 4
    Overall, though, the HOA seems to have done much better in 2017 than 2016. But... where's 2018??
    – RonJohn
    Dec 24 '19 at 16:23
  • 1
    How many units does it cover? Why don't they have 2018 financials available yet?
    – Hart CO
    Dec 24 '19 at 16:24
  • 200 units. I don't have newer financials but I know the loan is now paid off. The management company changed sometime in 2016.
    – quietmint
    Dec 24 '19 at 16:38
  • Are there supposed to be a few zeros after these values? Dec 24 '19 at 20:54

The first thing That I would require is that the HOA provide the 2018 numbers. Many will also have quarterly numbers to cover some of 2019. The quarterly numbers are harder to judge because some items like snow removal don't happen every month, but they will give you some idea of the status.

Ask for the reserve study, and more details on the reserve funds. Without a list of common property and where each item is in their lifetime, there is no way to know if the amount listed is enough. The fact that the balance of the reserve fund is only about double the annual contribution means the fund is either new or it is rebuilding after a major expense.

A comment on the numbers. If it is assumed that there should be three zeros added to the numbers quoted, then a back of the envelope calculation means that assessment income of $1,514,000 from 200 units means a monthly charge of ~$631 per unit. Is that correct?

It does list a large amount for utilities, so that must mean that the monthly fee includes utilities. If that is true the $100 plus per unit per month for the utilities makes things more reasonable.

I would ask about the Unappropriated members equity. I would like to know what that means.

  • regarding the large amount for utilities - it could be that the pool accounts for a lot of that, if its heated year-round, and they are in an area where snow removal is a factor. Water, sewer and garbage are often communal also. It's rare for electricity and gas to be communal in my experience.
    – Steerpike
    Dec 25 '19 at 17:55
  • Thanks. Correct, the monthly assessment per unit is $600 - $900 (depending on the size) and that includes all utilities (electric, water, sewer, gas, trash). I have a 40-year reserve study conducted three months ago and don't have serious concerns in this area. The building is old, so major items are nearing end of life, but the study projects the reserve account and rate of replenishment are on track to cover these expenses.
    – quietmint
    Dec 26 '19 at 0:12

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