Where the Money Comes From Co-op Financing for Interior-Exterior Maintenance

As residential properties in the metropolitan area begin to show the wear and tear that comes with age, properties in need of façade repairs and other exterior renovations to comply with Local Law 11 are scrambling to find financing for these projects. Whether exterior or interior, planned or not, the question remains: How will your building afford a project that could cost hundreds of thousands of dollars?

Three Paths to the Goal

When planning how to fund major interior/exterior repairs and remodeling, your co-op’s financial advisory team will likely suggest a trio of financing options. First, you might consider the traditional "pay-as-you-go" method. Second is the option of refinancing your building’s original mortgage. And lastly, you may choose to borrow under a line of credit or unsecured mortgage. While all three methods are used regularly, your specific co-op must analyze each option very carefully before making any decision; the financing strategy your board chooses can affect both its future vitality and economic health.

The pay-as-you-go approach–generally felt to be the least desirable to owners–requires each shareholder to add a special assessment to their regular monthly maintenance fees to cover the cost of the project. This option can be extremely expensive–as many co-ops have realized when evaluating their options for new maintenance projects.

"Our co-op was facing a $700,000 bill, just to replace the roof," recalls the board president of an Upper West Side building. "With 100 units in the building, each shareholder was facing a $7,000 special assessment–a tremendous expense in addition to their monthly maintenance costs, not including the other projects we had planned. For obvious reasons, this was not an acceptable option."

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