YOUR CONDOMINIUM CORPORATION NEEDS A FINANCE SOLUTION!
CONDO CORPORATION FINANCING 101 -
Surviving the Special Assessment: A Condo Owner's Guide to Unexpected Costs
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South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8
Direct Line = 416 319 5769
Email = sprokop@7parkavenuefinancial.com
CONDOMINIUM CORPORATION LOANS CANADA
Condo corp loan financing is a growing need arising out of numerous situations confronting the condo corporation directors and the owners they represent.
INTRODUCTION - CONDOMINIUM CORPORATION LOANS
Condo association /Condo corporations can borrow money to fund major repairs and upgrades to the condominium corp - Talk to the 7 Park Avenue Financial team about making this process easy and ensure the proper steps are in place to avoid any complexity around the loan and ensure financing reflects condo fees paid by owners.
BENEFITS OF CONDO CORPORATION LOANS
The condominium corporation has many benefits from taking out a condo loan. The first is maintaining a healthy reserve fund, which will help them if any project or building unit repairs go wrong.
Maintaining strong finances helps keep the functioning of a condo corp going more smoothly while also protecting investment in unit owners' condominium property values via effective condo corp term financing solutions. Adequate financing via properly structured condo loans eliminates a special assessment and prevents owners from paying a large lump sum.
Repairs and upgrades can be addressed immediately as required without waiting to reserve funds to accumulate.
Financing costs are competitive, and the cost of the financing can be amortized over the life of the project - it's a common sense financing strategy to match the useful life of assets with the term of the financing - that helps minimize the impact on condo fees to the owners.
While it may well be that cash and reserves cover needed investment to repair the common property or to address major repairs/upgrades and renovation costs, the condo board and the property management firm must consider borrowing via condo term loans when funding major maintenance et al.
INSURANCE
In numerous cases, some damages or repairs may be covered by the insurance policy of the condominium corp. This will depend on policy coverage and the types of damages, repairs, and upgrades the board may require.
BREAKING DOWN CONDO FINANCING AND UNDERSTANDING SPECIAL ASSESSMENTS, RESERVE FUNDS
The financing of Condo corps has long been an underserved market sector for their funding needs for necessary repairs when traditional business banking solutions are not available for providing term loans for the growing demand in this real estate sector via funding of majors repairs to the common elements Let's dig in on a deep understanding of this subject.
WHY DO CONDOMINIUM CORPORATIONS BORROW?
Loans for registered condo corporations make funds available and finance capital expenditures related to major repairs or replacements from things such as plumbing fixtures down through exterior finishes and whatever affects the general living conditions within these premises via replacements, add ons and repairs and alterations.
Long-term care and upgrades of existing condominium supply will remain essential to Canada's high-profile housing situation around individually owned units and exploding condo developments on the Canadian landscape.
Condo loans work and can assist projects that are either primary residences, vacation homes, or investment properties.
SPECIALIZED CONDO TERM FINANCING
There are numerous reasons, many of which we will cover for condominiums to seek special financing. Of course, financing is the alternative to depleting the condo corp reserve, or... Heaven forbid, issue a special assessment to each condo owner.
WHAT IS A SPECIAL ASSESSMENT
The condo boards and property managers will have to approve a special assessment for any repairs needed if financing is unavailable if the reserve has no or does not have enough money, and when owners pay or have to pay special assessments to replace or repair common property. Owners have a key interest in the ongoing resale value of their property.
The condo boards and property managers will have to approve a special assessment for any repairs needed if financing is unavailable, if the reserve has no or does not have enough money, and when owners pay or have to pay special assessments to replace or repair common property. Owners have a vital interest in the ongoing resale value of their property.
Special assessments are the funding that is required when the condo corp's reserve fund is either unable to bear the cost of a significant repair or upgrade to common elements - That involves the board of directors of the condo corp levy a specific assessment to individual condo owners to cover the costs of repairs of upgrades - It is common to spread the cost of the repairs and upgrades equally among unit owners relative to their proportionate interest ownership.
In any case, while many condominium owners and their management might maintain a positive and healthy reserve, the full depletion of that reserve is highly undesirable.
FINANCING CONDO CORPORATIONS / CONDOCORP TERM FINANCING
While good planning, cash flow forecasting, and reserve analysis are the essence of any solid condo mgmt owner/mgmt team, surprises often occur, as they do in any business. That's when a condominium corporation loan might make sense to save the day.
Condo repair and upgrade financing is a specialized form of financing. In many cases, the transaction certainly isn’t ' collateralized' in the same manner as a typical business corporate entity might be. So it's clear that solid loan application expertise is required for the condominium corporation to borrow effectively. That ability to translate the condo corps' payment ability into the real world of cash flow is critical.
CRACKING THE CODE OF CONDO CORPORATION FINANCING
In many cases, Canadian chartered banks don't offer this type of financing; it's highly specialized, as we have noted. Considering that the individual owners move and the board and condo mgmt company can also be in flux over the years, the term 'specialized finance ' makes tremendous sense.
What documents are critical to a solid borrowing plan from a lender's perspective? Key elements include a budget and cash flow forecast, historical and current financials, and specialized docs specific to a condominium, such as a reserve study. That cash flow analysis is reviewed carefully as with any other regular business operating entity.
While in theory (and law!), the condo corp can issue special assessments and ' liens' on the property. Those actions are highly undesirable and not how the boards of condominiums like to operate. By the way, boards that intend to borrow require a solid bylaw to be in place, ensuring the board of directors has full authority to borrow.
Funding majors Repairs To Common Elements Of Condominium Property
Lenders will also want to ensure proper use and disbursement of funds vis the reserve and operating expenses. Characteristics of a good condo cor loan are that they are for proper repairs warranted in ' common element' areas. Condominium repair loans are typically structured as term loans with fixed interest rates. Larger projects might be funded in stages via ' progress payments.'
Careful care should be taken by the board (and the lender!) to ensure cash outflows match the asset or improvement's useful life or repair.
CONCLUSION - FUNDING MAJOR REPAIRS IN THE CONDO CORPORATION
If you're looking for financing for registered condominium corporations and expertise in condo finance for repairs and improvements that bring financial flexibility and health to your condominium corporation, seek out and speak to a trusted, credible and experienced Canadian business financing advisor who has a long successful track record and who can assist you with condo term loans that make sense.
Let the 7 Park Avenue Financial team show you how providing tailored financial services and effective condominium corporation financing for Canadian condominium corporations helps and increases the equity/ownership value of your property and the health of condo financials. We're a boutique financial services company that can help you with your economic challenges.
FAQ: FREQUENTLY ASKED QUESTIONS / PEOPLE ALSO ASK / MORE INFORMATION
What is a reserve fund?
Financing significant repairs to the condominium corporation invoices the spending of reserve funds.
Also called a ' sinking fund, this is a savings account into which a condominium corporation regularly contributes. The fund is intended to cover the cost of significant repairs or replacements of the condominium's common elements, such as roofs, elevators, boilers, and parking garages. The amount to be saved is typically determined by a reserve fund study, which is an in-depth analysis of all the major components and systems of the condominium, their remaining lifespan, and their replacement cost.
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