What is a condo reserve fund for a homeowners association?
If you live in a condominium building or a building controlled by an association, you are probably paying monthly Homeowners Association (HOA) Dues. This is an amount of money that can vary wildly depending on your property and the city you live in. This money primarily goes towards the infrastructure and servicing of that property.
In addition to general maintenance, a portion of your HOA goes into a savings account called a reserve fund.
Think of it like a giant piggy bank for a condo building. A portion of your monthly HOA dues is saved here every month for long-term projects and unexpected surprises. In this video, we talk about how it all works.
There are a lot of projects that take place on a property that do not have to happen every year. For example, replacing a property roof or air conditioning system is not something that is done often, but there needs to be a savings account that will pay for these projects when the necessary time comes.
In addition to long term projects, this money is spent on unexpected problems that arise and is essentially a rainy day fund.
If you’re buying a condominium or a home that is run by an association, the most important thing is to review and investigate how much that association has in savings. If you’re investing in a large property but they only have a small amount of money put away, this should be an automatic red flag.