PAY NOW OR LATER…
By
Rafael Aquino
Published March 30, 2022
(I wanted
to repost a blog I wrote back in 2019 to continue the conversation
on reserves and the importance of reserve studies)
The use of associations funds is one of the most
critical roles a board of directors manages on behalf of its
members. Many times the benefit of those funds can make or break an
association. It is essential to get a snapshot of what's going on
with the association's funds before the purchase of your unit and
even more so after your purchase. While it may seem challenging to
know what is going on before your purchase, the reality is that you
can get an idea by reviewing the financials and checking to see the
association has a reserve study on file.
Not enough homework is done early on by potential
buyers, or their agents, to determine the association's financial
strength, and they assume that all is well. That assumption can cost
thousands of dollars if made incorrectly. How can you avoid it? The
first step would be to dig into the financial statements; within
those statements, you'll know much money your association has in its
operating account and reserve account (if it exists.) Second, you
can review the Income/Expense (also known as a P&L) to determine if
significant variances exist. If they do, you will need to find out
why they exist. You can then compare your current operating and
reserve account funds to what your reserve study states you should
have. The reality is that most associations won't meet the suggested
capital contributions needed within the reserve study; however, you
do want to know if the difference isn't outrageous. If it is, you
may decide not to purchase in that building, or if you're a current
owner, it may be time to sell. Remember, it's not if it will happen,
but when it will happen.
For individuals wondering what a reserve study
is, it is a long-term capital budget planning tool that helps the
board of directors and management identify both the physical
analysis (useful life) and the financial analysis of the components
in the common areas. This tool will allow your board to plan
appropriately, project its future projects, and determine when and
how the money they do have should be spent. I've seen it firsthand
where a board wants to upgrade the pool area because they promised
the owners they would improve the look of the property, but at the
same time the cooling tower needs a significant overhaul. As odd as
it may seem for most, this decision is simple; however, that is only
true based on the leaders (board) you have appointed.
While many communities don't have reserves, this
should not stop you from obtaining a reserve study. The cost to get
a reserve study is minimal compared to the information/knowledge you
and your board would gain. We strongly recommend our clients obtain
it; in fact, we had a client who listened to our suggestion and
purchased a reserve study a few months before the budget season.
Once they received the study, they quickly realized that it was time
to start putting real plans in place. A few months later, that board
decided to begin funding the reserves.
For those potential buyers looking to purchase in
an association, make sure you do your homeowner. For those owners
that already own in an association, make sure to ask your board
members if they have a reserve study on file and if not to consider
getting one. I believe it's better to know what will potentially
come so the proper steps and plans can be taken to either correct
and/or communicate it to your membership.
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As the Co-Founder and CEO
of Affinity Management Services, Rafael P. Aquino leads his team to
redefine excellence. They serve community associations
efficiently |
and effectively with
dedication and passion. Rafael’s energy and positive
spirit is the foundation of Affinity Management
Services’ company culture, which instills enthusiasm and
excitement when providing expert advice to its board
members and relieving the day-to-day burdens of running
a community association.
Since 2007, Rafael has
developed a work culture that values responsive and
high-quality services. He has led his team by following
a proactive vs reactive philosophy. The same approach
Rafael instills in the day to day operations of each
association. Today, Affinity Management Services
maintains its success and benefits as a result of the
foundation Rafael has built and continues to foster by
providing educational seminars, continuing education
classes for association managers and board members
alike.
Rafael and his team help condominium and homeowners’
associations save money and improve their communities.
His calm, personable, and service-oriented nature helps
him to establish strong relationships with ease. Rafael
is known as a sincere and honest leader who looks out
for the best interests of his clients and communities,
and he strongly advocates for their needs. His role
requires coordination and communication, as such he
takes logical and intelligent steps to approach
challenges head-on.
As a graduate of Florida International University’s
electrical engineering program and a licensed community
association manager, Rafael’s education and skills equip
him with unique insights to tackle complex problems
through critical thinking. He understands how each
component within a system works together in order to
effectively arrive at solutions, techniques, and
conclusions. Therefore, as he manages the multiple
challenges of running a community association management
company, he understands how each property is its own
unique system and tailors’ specific services to assure
that all their needs are met.
For more information about Rafael P. Aquino and Affinity
Management Services please visit
www.ManagedByAffinity.com or call 1-800-977-6279
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Doral Office: 8200 NW 41st ST
Suite 200
Doral, FL 33166
Broward Office: 150 S Pine Island RD Suite 300
Plantation, FL 33324
O: 800-977-6279 ● F: 305-325-4053
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