Cohousing-L Mailing List: Re: Reserves versus operational repairs/replacements, and earlier, Reserve Studies

[Sharon Villines (sharon]

> On Feb 5, 2023, at 12:37 PM, Sarah Lesher <sarah.lesher [at] gmail.com> wrote:

> This is required in 30 states (plus NYC), but do
> cohousing groups in states where it is not required do it as part of being
> responsible and future-thinking?

I don’t know that anyone has figures on this but certainly, any community that 
is following best practices for a sustainable financial future should have a 
reserve fund. Ours has been a godsend in covering timely replacements, and 
unexpected replacements, and allowing us the flexibility to replace our roof 
early to accommodate solar panels. That alone allowed us to replace a dying 
20-year roof with a much better 50-year roof and save close to $2,000 a month 
in electricity fees.

Having reserves for things you know you will have to replace in order to 
maintain property values is the best way to keep a community affordable. 
Planning ahead so there are far fewer surprises.

> Half of the adults in our community are over 70.  Others are young
> families, or even more financially stressed, single mothers.  It will be
> very difficult to compensate for the lack of long term investment in a
> reserve fund substantial enough for dealing with some special challenges we
> face (including a crumbling iron foundry from the 1800’s).

You are an individual lot development model, right? Individual homes? It would 
be different from an attached building model where the community is maintaining 
all the buildings. If you have never done a reserve study you probably have no 
estimates of what replacement and major maintenance will cost. Or even what is 
the homeowner’s responsibility and what is the association’s. Since you have 
incorporated adjacent properties along the way, these responsibilities may not 
be very clear to owners, either.

I think the best course would be to consult a property manager who is also a 
reserve study specialist to consider your options. Or someone in commercial 
residential real estate. Contributing to a reserve fund is no more expensive 
than paying for new siding or roofing out-of-pocket. If the roof is leaking, 
the building will quickly become unusable. Owners will have to pay large sums 
unexpectedly. You may have some advantage by using the 5 acres as security for 
financing. But you need carefully considered professional advice to avoid a bad 
deal.

In all likelihood, the buildings are declining in value because new owners will 
have to invest more in maintenance that is not being done for lack of funds.

It’s only too late if you don’t start now.

Sharon
----
Sharon Villines
Takoma Village Cohousing, Washington DC
http://www.takomavillage.org