Top Tips to Offset Inflation in your Coop or Condo
Inflation is not just the increased price of milk or a gallon of gas, it is something that affects virtually every aspect of our (economic) lives. This obviously also relates to coop and condominium living.
We are currently in an environment where inflation is at a 30-year high, due in no small part to a Keynesian economic approach of massive government spending and intervention. While we hopefully will not return to the days of 18% mortgages, we all must do everything we can to protect property values by reigning in expenses wherever possible.
As any real estate professional will tell you, an apartment’s price is determined by many variables -- size, location, floor height, etc. The chief among them, and arguably the most controllable one, are the monthly charges. Be it coop maintenance or condominium common charges, the lower the charges are, the higher the asking price. The reason is that the combined mortgage and charges help determine the apartment’s worth. Therefore, a successful coop board or condo board can pay a large role in determining a shareholder/ owner’s apartment price, and thus net worth!.
While we can’t personally control inflation, the fact that costs are rising overall makes it even more important that board’s do their utmost to control expenses and consumption.
A major expense for coops as well as individual owners is their mortgage. Mortgage rates are still near all-time lows, but if inflation stays around, interest rates are likely to rise. This means that if you haven’t already, or if your mortgage comes due in less than ten years, you may want to seriously consider refinancing. We have seen buildings literally cut their mortgage expenses by as much as 70%!
Water consumption can also be managed. Building’s policies can be amended to require high-efficiency toilets; the superintendent’s office can check all apartments for leaking toilets, inefficient plumbing, etc., and cure these issues. Lastly, your building can install a device that “compresses” the water at the source before it is measured by the city, thus reducing the capacity that is measured. These methods have reduced building’s water consumption by as much as 25%!
With electricity prices likely to rise, you may want to consider swapping out old light bulbs with new energy efficient bulbs; change to more efficient fixtures; install motion sensors. We have buildings that have done this and cut electric consumption by as much as 65%!
If your insurance hasn’t been bid out competitively in a few years, get competitive bids. We have seen insurance costs slashed by as much as 45%!
Review the property management firm’s proposed budget. They typically have a built-in increase for each cost item, which in many cases does not take into consideration your coop or condo’s specific circumstances. Several of our coop and condo clients have not needed increases in the fees after us making some minor adjustments to better reflect their building’s situation.
As you can see, even though these are all considered “fixed-costs,” these four items can add up to significant savings for your building, help avoid the need for a maintenance/ common charge increase, protect property values, and make coop and condo board members much more popular in the building lobby!
For other best practices for co-op and condo boards, get our FREE Policies and Procedures Checklist emailed straight to your inbox. At The Folson Group, our goal is to inspire you to run your building like a business. We enable and inspire co-op or condo board engagements to be filled with a feeling of accomplishment, excitement, meaning, happiness, and increased probability of success.
Email us at info@thefolsongroup.com or call us at (917) 648-8154 to see how we can help your co-op or condo board today.