Is this a healthy HOA financial statement?

[Jacob P.]

Hi guys,

We've invested in townhomes up until now, but currently have an accepted offer on a condo.

I just received financial statements for the last 2 years. I don't know exactly what to be looking for, but generally speaking it's not looking super healthy.

It's a 15 unit, older building. Converted to Condos 20 years ago.

They ended last year with $20K in the operating fund, after declines of $5K and $10K in the preceding years. They collect about $50K in fees per year.

There were no extraordinary expenses over that period. The bulk of it was management, Insurance, Fuel, etc. with maybe on average $5 to $6K in various repairs.

Obviously the decline in reserve accounts is a big red flag, and I'm wondering if it's enough to potentially walk away from this deal?

[Russell Brazil]

How many units? $20k could be direly low, or not that bad. What caused the drops, was it sudden one time expenses that dont come up all the time. In the last 2 years, most HOA/Condos have had sudden drops the last couple years due to higher than usual snow removal, so I dont think that is a red flag. I own a townhouse in a community of about 40 townhouses...they typically have about $25-$30k in reserves, and that is more than sufficient...but they also are only paying for landscaping and snow removal with it.