How a Chicago Property Manager Plans Ahead for Inevitable Emergencies

If there is anything sure in life, particularly in the life of a Chicago property manager, it's that the major problems will occur at the most inopportune times. When did a plumbing backup ever happen at a convenient time? 

But planning for those inevitable failures and necessary repairs is what differentiates an effective HOA manager from one who responds only to crisis situations. Advance planning also signals the difference between a prime property and one whose tenants or residents will flee at the first opportunity.

An Effective Planning Tool 

One of the most effective planning tools is the Reserve Study, with specified regular funding that is kept separate from routine operating funds. The reserve funds should be invested and allowed to grow over time so that both preventive maintenance and needed repairs or replacements can be made on a timely basis as systems age, with no need for special assessments. A reserve fund also means that there is no need to wait for a crisis before making repairs. Scheduled replacements become part of a master plan.

What is a Reserve Study? 

As a professional property manager, you no doubt know that all building systems have life spans; they can range, typically, from two to 30 years. With adequate routine maintenance, you should be able to stretch the minimums a bit, but if you don't plan for replacement, you will be caught up short by a leaky roof, a burst pipe, a suddenly ineffective cooling system, or a broken elevator. 

The best way to avoid that sort of drama is to plan, in a measured and well-defined way, for timely expenditures to address needs at appropriate times. Take these steps:

1. As early as possible in the life of the building, have a professional assessment performed that analyzes usable life of all building components. It is an element of financial planning that assumes the effectiveness of regular maintenance, but also builds in contingencies for unexpected occurrences.
2. Sharpen that accounting pencil and assign real dollar values for updates and replacement of all systems and components. The common formula is: Remaining life divided by replacement cost yields annual funding requirements. Be sure to factor in inflation, raw costs for materials and labor and expected investment income and fund growth. 
3. Budget the total reserve amount every fiscal year, and let the reserve amount grow, knowing that funding is available that should be sufficient for all needs.

Once again, if there is any certainty in the property management business, it is that someday those funds will be needed, very possibly at an inconvenient time. With an adequate reserve fund, your owners and tenants will feel much less pain than they would if they were asked to pony up dollars for a special assessment.

An important part of any reserve study, whether for a new building or an older one, is to research the "better ways" that have been developed to replace such things as failing pipes. As just one example, The NuFlow System can simplify correction of leaky pipe problems and very possibly save you money as well. If you have questions about our innovative plumbing solutions, please contact us.