A significant cost, when buying a property that is part of a small common interest development, can often be the monthly or other periodic fees due to the homeowners association. A lot of homeowners mistakenly look on this money as part of their investment and while they are not entirely wrong, once the money is paid it becomes the property of the homeowners association rather than being directly linked to their property.
Association’s Reserve Fund
The Homeowners Association Reserve Fund is usually established from the start of the sale of properties in a common interest development and acts as a pool of all the money from the required payments from owners of apartments in the complex.
The money can be used for a variety of different uses, but its intent is largely threefold. First to pay for the upkeep and maintenance of the property as whole, second to finance any large capital improvements the may be needed for the property and finally to provide an emergency fund in the case of a disaster or other unforeseeable event that would require a quick outlay of cash to resolve the issue.
What many owners do not factor in, is that if they owned their own property, the money they are paying to the Homeowners Association is often representative of the type of expenses that they would need to spend anyway on a standalone property to keep it properly maintained.
Are there Benefits?
While funds cannot be withdrawn from the fund if an owner decides to sell their property, the existence of a well funded reserve fund can be a strong selling point on its own. People looking to invest in a common interest development will often take a detailed look at the financials of the fund to see that it is being used for its intended purpose.
If this is not the case then it can put off potential purchasers so it is in the existing homeowner’s interest to keep a close eye on the disposition of the reserve funds on at least an annual basis, versus the level of maintenance and improvements going on around the property.
While there may not be an obvious cash benefit to this type of arrangement, not having the headache of having to deal with day to day maintenance issues combined with the additional appeal come sale time can make it a very worthwhile investment.