I know your question is more of a financial one, but after reading a ton of objections to HOA's etc. I wanted to give my 2 cents. I buy and sell a lot of condos for clients in the Seattle area and analyze a lot of condo docs on their behalf. There are certain items that have to be provided by law(in WA) once you are under contract and some are more useful than others. The ones that I find most telling of a buildings health and stability are as follows:
- The Reserve Study - this is a 30-year analysis of the buildings present, future, and possible maintenance costs. It looks at how much they have in the bank (Reserves), how much they are saving annually and whether that is sufficient. They generally come up with a "% of funded" Most buildings in downtown Seattle are between 30-90% of funded. Above 60% I'm generally less concerned and anything below I want to know why and what the plans are to correct.
- Budgets and P/L - If reserves are low, the budgets and P/L should tell the story of why. Sometimes depletion of the reserves is a conscious decision and can be explained. Perhaps the roof needed to be replaced and they decided to pull if from the reserves rather than hit the homeowners with a special assessment. You may see that they increased HOA dues to build the reserves back up. Other times you'll see that the HOA is just poorly run and you want to avoid that property.
- HOA Meeting Minutes - These can be the most telling documents sometimes. I always look for these on a notice board when I first visit a property. Well run buildings often have them clearly displayed in the lobby for all to see. This transparency is often a good sign. If there are problems in the building, the owners will be complaining about it. These docs can be a goldmine of information because they often identify issues before they make it into any budgets etc.
Condos can definitely by tricky, but like anything, you can mitigate risk by doing your due diligence. I also encourage condo owners to sit on the board and make sure to vote when issues come up in the building. You can effect the outcomes in your building if you participate and make your voice heard. It's like politics, if you don't participate in the process, your complaints don't carry as much weight.
Lastly, I like to know whether the building is professionally run or self-managed. I know which management companies do a great job and which don't. There are also indicators when you walk into a self-managed building that hint as to whether it's well run or isn't.
