Thinking Outside the Box Creative Financing Strategies for Your Co-op

While there's certainly no shortage of affluent co-op and condo buildings in New York City, it's a fact that a significant proportion of buildings are home to residents of more modest means--buildings for whom large capital improvement projects, emergency repairs, and major maintenance increases may constitute a significant financial hardship. For those buildings, price is definitely an object, and oftentimes board members and managing agents are hard-pressed to come up with creative ways to increase revenue. For those willing to do their homework and get creative, however, there are many methods by which middle- and lower-income buildings can increase their cash flow, build up their reserve fund, and stay solvent, no matter what the economic climate.

The Root of the Problem

Before sweeping changes are made to a building's policies or practices, it's important to know why a co-op or condo is teetering toward the red; is it because the funds just aren't there, or is it because the funds that are there aren't being allocated and spent properly?

According to Patrick Niland of mortgage brokerage First Funding of New York LLC, "A first step would be to determine whether a budgetary imbalance is due to a permanent shift in the co-op's finances, or just a temporary or onetime occurrence. Since the origin of a problem often involves its timing, a solution sometimes can be found there as well."

Many boards understand this and move quickly to close the gaps in their budget by simply levying a special assessment or increasing maintenance. While such moves may be part of the ultimate solution, neither should be imposed without careful consideration of their long-term ramifications, says Niland--particularly in lower- or middle-income buildings with many families and seniors on fixed incomes for whom a large assessment may spell serious financial crisis. Occasional assessments are unavoidable, but a pattern of chronic, mounting assessments not only puts the screws on residents, but often implies that a building is poorly run. That in turn can compound the problem by making an already-strapped building a tougher sell for prospective owners.

Quick Fixes vs. the Long Term

What approach a building takes to solving a money-crunch depends very much on the nature of the building and of the financial problem at hand. A building with lower-income residents that has been struggling for years to make ends meet is unlikely to suddenly find itself flush with cash, and must therefore look to the long-term stability and solvency of the community. On the other hand, if it's a question of repairing a leaky roof with the rainy season on the way and the ink still drying on the check for a new boiler, some workable quick-fix options do exist.

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