Cohousing-L Mailing List: Re: What is your community's current reserve funding level?

[Sharon Villines (sharon]

> On Oct 4, 2024, at 10:54 PM, Sylvie at Hotmail <s_kashdan [at] hotmail.com> 
> wrote:
> 
> Clarification

> As part of our discussions, some people are wondering whether or not other 
> communities that have reserve funds are currently funding them at levels 
> lower than seventy percent for the end of the thirty year period. Have any 
> communities had positive or negative experiences related to the level of 
> percentage funding of the reserve funds.

I’m greatly encouraged by the number of communities who have responded with 
information about how they do their reserve studies. When I started this 
conversation almost 20 years ago and doing workshops on the topic, almost no 
one had reserves or a reserve study. I mean that literally.

We have had good reserves since the beginning because we had a few members in 
the financial industry who knew how important they were. I learned from them 
and it has been a great boon to us.

Recommendations based on experience:

1. Ask the Assoc Reserves to run the numbers for 100 years. Obviously 
guestimates can’t be so accurate that far out BUT the graph is totally 
convincing. It was our 100-year graph done by our first reserve study company 
that convinced our members of the need to save now for the future. A 30-year 
timeline does not show the huge amts that will most likely be required long 
term. The visual mountain is entirely convincing.

2. There is good fortune out there. Knowing what things might cost is 
educational and allows you to plan. It also allows you to change. And having 
funds available for changing. I’ve promised to write up this example, and I 
will, but here is the short story. When it became cost-effective to install 
solar panels, we had the funds to install them by borrowing from the reserves 
and using donations. We were installing panels 2-3 years before we were to 
replace the shingle roofing. The shingle roofing was already showing signs of 
wear so it was an accurate prediction. Why install solar panels over a roofing 
that would soon need to be replaced and we would have to remove the panels to 
do it? We had saved the money to replace the shingle roofing so we folded the 
replacement into the cost for the panels and did it all at the same time.

The result was we replaced the 20-year roofing with 50-year roofing (at the 
earlier cost for 20-year) and installed the panels. We used the savings in 
electrical bills to pay back the reserves. And the rebate from selling extra 
electricity back the city was added to that eventually — the city was very 
wishy-washy about buying electricity and it was unclear if they would give us 
credit or actually pay us. Credit, of course, we couldn't really use unless all 
our panels failed. Theydo give us credit now but the basis is not really 
dependable. New mayor, etc.

Having money on hand is worth far more than most of us who have lived week to 
week or month to month realize. Flexibility allows you to take advantage of 
opportunities and reduce costs later on. Every property decision is a 100-year 
calculation. 

3. As Grace Kim said, affordability requires no surprises. There are no margins 
for error in low or even middle-income households. They just don’t have extra 
money sitting around. For example, very wealthy communities carry very low 
reserve accounts because they do have extra money sitting around. And as 
individuals, they can invest money for higher returns than condo reserves can 
be invested so they are wasting money by having it sit in safe reserve 
accounts. When $25,000 from every unit is required is needed in 60 days they 
have it.

4. A great boon to us has been owners donating to a Special Projects Reserve 
Fund. When they sell their units they are reminded that the whole community has 
worked to make this a good place to buy a unit and the Resale and Rental Pod 
has replaced the need to pay a real estate agent which has saved them a 7% 
realtor's fee. Almost everyone has donated in the range of $8-10,000 to that 
fund. At 15 years people began to move to assisted living, downsize, move to a 
better school district, or die. That fund has grown considerably. Even 3% of a 
$500,000 sale is $15,000.

5. It is also possible to put a lien on a unit that can’t afford to pay so 
those funds are collected with the unit is sold. If the community can afford 
the costs in the meantime, that is a sure way to be reimbursed (if the market 
is good, etc.) and allows a household to stay in the community until an agreed 
upon event/date.

I’m so glad you explained the problem. 

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