Tips for Analyzing a Co-op or Condo Building’s Balance Sheet
Hauseit
2019-05-10
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Analyzing a Condo or Co-op Building's Balance Sheet: https://www.hauseit.com/condo-coop-building-financial-statements-nyc/
Save Money with a Hauseit Buyer Closing Credit:https://www.hauseit.com/hauseit-buyer-closing-credit-nyc/
The building’s balance sheet is a snapshot in time of what the building owns (or assets), what it owes (or liabilities) and its net worth (or equity).
Cash and Reserves – A standard rule of thumb when evaluating a building’s cash and cash equivalents balance is to make sure that it has a reserve worth three to six months of the building’s normal operating expenses, in addition to any anticipated capital improvements for the next twelve months.
Accounts Receivable – You shouldn’t see large accounts receivable balances for a normal coop or condo building. Generally, the only accounts receivables you might see will be payments owed from coop shareholders, condo owners or commercial tenants. It is concerning if you do have commercial tenants or unit owners in arrears on their payments.
Any such arrears or large accounts receivable balances should be scrutinized further.
Accounts Payable – A normal coop or condo building should not have a high accounts payable balance. Bills in a normal building are paid promptly when received. There shouldn’t be debt accumulating and an excessive amount of accounts payable owed to vendors may indicate that the building is undergoing financial trouble.
As a general rule of thumb, you should do further due diligence if the accounts payable balance is greater than 10% of the annual building revenue.
Debt – Mortgages on the building are common for coop buildings, especially if they own the land. Mortgages are relatively rare on an entire condo building because a condo association only has the power to levy common charges, but does not own the entire building and land as a coop corporation can.
Mortgages on coop buildings are often five year interest only loans these days. If you see that a mortgage will expire in four or five months, then a refinancing should have been completed already. In practice, there is very little risk of a coop building not being able to refinance its mortgage.
Calculate Your Buyer Closing Costs: https://www.hauseit.com/closing-cost-calculator-for-buyer-nyc/
#hauseit #hauseitnyc
https://www.hauseit.com
Save Money with a Hauseit Buyer Closing Credit:https://www.hauseit.com/hauseit-buyer-closing-credit-nyc/
The building’s balance sheet is a snapshot in time of what the building owns (or assets), what it owes (or liabilities) and its net worth (or equity).
Cash and Reserves – A standard rule of thumb when evaluating a building’s cash and cash equivalents balance is to make sure that it has a reserve worth three to six months of the building’s normal operating expenses, in addition to any anticipated capital improvements for the next twelve months.
Accounts Receivable – You shouldn’t see large accounts receivable balances for a normal coop or condo building. Generally, the only accounts receivables you might see will be payments owed from coop shareholders, condo owners or commercial tenants. It is concerning if you do have commercial tenants or unit owners in arrears on their payments.
Any such arrears or large accounts receivable balances should be scrutinized further.
Accounts Payable – A normal coop or condo building should not have a high accounts payable balance. Bills in a normal building are paid promptly when received. There shouldn’t be debt accumulating and an excessive amount of accounts payable owed to vendors may indicate that the building is undergoing financial trouble.
As a general rule of thumb, you should do further due diligence if the accounts payable balance is greater than 10% of the annual building revenue.
Debt – Mortgages on the building are common for coop buildings, especially if they own the land. Mortgages are relatively rare on an entire condo building because a condo association only has the power to levy common charges, but does not own the entire building and land as a coop corporation can.
Mortgages on coop buildings are often five year interest only loans these days. If you see that a mortgage will expire in four or five months, then a refinancing should have been completed already. In practice, there is very little risk of a coop building not being able to refinance its mortgage.
Calculate Your Buyer Closing Costs: https://www.hauseit.com/closing-cost-calculator-for-buyer-nyc/
#hauseit #hauseitnyc
https://www.hauseit.com
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