Tip of the Month - February 2014

In any budget forecast, the reserve fund is placed in the expense category, either under maintenance or repairs. In large buildings, this figure is often estimated at 10-15 percent of the total cost of all supplies, maintenaance, and repairs, but the actual amount of necessary reserves fluctuates greatly accordingly to a property’s age and size, among other features. Experience alone will teach the manager to calculate reserve funds realistically. Property management professionals have a saying that “unexpected expenditures may be expected”. Roof repairs, boiler replacement, outside masonry repair, and expenses due to flood or other catastrophe not covered by insurance are only a few of the unforeseen contingencies that can arise. Many mortgage loans under federal government programs require establishing a reserve fund for replacement expenditures.