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Borrowing Is an Option for Homeowners Associations

February 09, 2012 | Comments: 0 | Views: 135

Arriving just in time for your aging common interest community is a fairly new option for condominium, cooperative, and timeshare boards - an option sure to smooth those riotous owners' meetings. It is another arrow in your quiver to solve those nagging maintenance problems that just seem to come out of the woodwork (or are caused by it).

Whoops, we need a special assessment on top of the monthly assessment increase you just approved three months ago! So who could know that a sinkhole would form in the parking lot?

The option that more and more condominiums are discovering is the bank loan. This option is arriving on the condominium scene all across the country as more and more properties are facing the problems of aging. Many condominiums were built in the mid- to late- 1970s, making them 20+ years old. It is well past time for things to go bad. Or, framing the problem in terms of technology improvements and desires for aesthetic changes, there is a need for upgrades.

Another group of complexes that have a lot of work to do are those built in the mid-'80s. Unfortunately, it is not unusual for this group to suffer from poor workmanship or low-quality materials. These weaknesses are now resulting in premature problems.

Typically, condominium associations have been left to their own resources to support the cost of the repairs that are needed. The results have not been particularly favorable. The cost impact of these projects makes residents shudder. Often, the projects compound on top of themselves with the result being maintenance imprudently deferred.

One way out of this dilemma is planning properly for failing components and financing the current project(s) with a loan to smooth the impact on unit owners. By utilizing a loan, the cost of the project is spread over several years instead of a few months and most owners will appreciate this approach.

There is a third group of associations that can benefit from financing. These are complexes that are subject to land leases. These associations can purchase the lease and pay off the obligation long before the lease would ever mature in order to potentially save a large sum of money! Perhaps there is a need to purchase adjacent land as a buffer from undesirable development or to acquire a parcel that has been accessible only by easement. Of course, facility additions like building a clubhouse, pool, tennis court, etc., also make sense to finance.

Now, how do you find a bank that can provide the financing? Financing for condominium associations is relatively new. Changes in state statutes across the country have made this industry a viable and safe place for bank financing. However, most banks have little experience with this industry. The first chore is to find a financial partner that is comfortable and skilled with financing a condominium association. A specialty lender is the logical choice to provide your financing as lending to HOAs, condominiums, cooperatives, timeshares and other common interest communities is their only business.

Bob Gourley, Founder HOALendingSolutions.com

Source: EzineArticles
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