Consider a nest egg for your condo purchase
Consider your nest egg when making your next condo purchase.
Always a subject for investigation and concern, the health of a condo‘s contingency fund forms a major part of the decision to purchase a suite to call home or an investment in a condo building. While the presence of a healthy financial statement combined with other necessary strata documents, such as the dreaded depreciation report, is of vital importance, another important topic comes up often: personal contingency funds.
Make sure to account for some extra funds in your budget to build your nest egg for a rainy day.
Any condo building is going to need maintenance over time, new or old, wood frame or steel construction. It is important to review the strata documents with any strata purchase and, while healthy records and projections may prepare for the rainy days of balcony and roof assessments, many clients are thinking of ways to hedge their bets, so to speak, against the dreaded words of “Special Assessment.” One way of doing so is to set up a personal contingency fund.
A small, consistent, monthly amount could be budgeted and put aside in a low-interest savings account to build capital for a rainy day. While this idea is in no way groundbreaking or revolutionary, it is surprising the amount of clients and potential buyers that have not thought about this in detail.
I recommend confirming the finer details with your financial representative, but a simple time-value of money calculation will show that over a 15-year period, $50/month at a conservative 3% interest rate will yield almost $11,500 in savings; increase your investment to $100/month and you’ll have almost $23,000 in the kitty. A simple yet effective strategy to enjoy your investment and add peace of mind.
If you take the initiative and include your contingency fund savings in your overall purchase budget, then that will keep you protected from any special assessments or unforeseen expenditures needed for your condo.
– Kevin Jones*
*Personal Real Estate Corporation
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