As buildings age, capital improvements become necessary for maintaining the property and improving the overall quality of life for residents. Whether it’s a roof replacement, window upgrade, or other significant repair, these projects can be major expenses for condo associations, and one of the biggest challenges facing Chicago condo communities is how to fund these capital improvement projects.
Read on to learn more about three common ways condo associations can fund building capital improvements, including using reserve funds, implementing special assessments, and exploring financing options. Your association board should consider these funding options as they evaluate the resources they need to keep the community’s shared property in good condition.
Funding Considerations for Association Capital Improvement Projects
Condo associations can fund capital improvements in several ways, and the board must assess which solution best fits their association’s specific financial situation. Here are three common ways condo associations typically fund a capital improvement project:
● Reserve funds: Reserves are a designated portion of the association\’s budget that is set aside for major repairs or replacements. By contributing to a reserve fund on a regular basis, the association can accumulate the necessary funds to pay for capital improvements when needed.
● Special assessments: This is a one-time charge to owners to cover the cost of a specific project or repair. While special assessments can be an effective way to fund capital improvements, they are generally unpopular with owners.
● Financing: A third option condo boards can consider is taking out a loan. This is a way to spread out the cost of a capital improvement over time. Then, the improvement project can be built into future budgets and the board can vote to increase fees or levy special assessments to repay the loan. Financing carries risk, however, and it’s important for the board to carefully consider the true cost of financing.
Ultimately, the best approach for funding a building capital improvement will depend on the specific needs and financial situation of your condo association. Consider working with an experienced Chicago property management company as you evaluate your budget and determine the best funding strategy for your future capital improvements.
Contact us today at First Community Management to ask your questions about our full-service association management solutions.