One of the most important issues in deciding if a cooperative or condominium apartment is a wise
investment is the financial status of the building itself. The key document that potential buyers should review is the annual financial statement. This review, commonly known as due diligence, should be performed by either an attorney or an accountant before signing any contracts. However, before incurring the expense of retaining a professional, there are certain key elements of a financial statement that can be reviewed by the buyer himself.
Financial statements are often required by banks before they will approve individual loans to apartment buyers. A good financial statement, if properly prepared, will convey complex facts with simplicity and will be easy to read. It is important to try to review the last two years of financials to track changes in income, expense and reserves.
The financial statement is usually prepared by a certified public accountant. When prepared accurately, the statement will indicate whether the building is in good or poor financial condition. A financial statement should include a balance sheet describing assets and liabilities, a statement of income and expenses (also known as a statement of operations) and a statement of cash flows. Footnotes are used to clarify many of the numbers that appear in the statement and will disclose other pertinent financial information.