9 things to look for to ensure you are buying into a healthy strata building

Given the high prices in the Vancouver area, buying a condo can be one of the biggest decisions financials of your life! Here are some signs to be sure that you are buying into a healthy strata corporation:

Here is a quick 9 item checklist for buying into a healthy strata building:

1. Does the strata corporation have a healthy CRF? The CRF stands for Contingency Reserve Fund, and is basically the strata’s savings account for large, expensive, capital (long lasting) items. How much is enough? Well, that really depends on a number of factors such as age of the building, and what is noted on the depreciation report.
2. A depreciation report. This will act as a financial planning tool for all major capital items within the building. What needs to be replaced, and when. It’s a great tool for Buyers to compare building to building, and the lack of one could be considered a potential red flag in certain cases.
3. Resolutions being voted down. Are large maintenance items being voted down consistently? Read through the minutes to see if this is happening. It’s more common than you might think, especially in buildings that are looking to eventually sell to a developer. Read through the minutes and see if that much needed elevator replacement has been voted down at the past 3 AGM’s…
4. Deferred maintenance. Much like above, deferred maintenance is a bad sign. Look at the big ticket items such as roof, pipes, elevator, building envelope, and membranes. These are all very expensive as they require a substantial amount of labour. Avoid the big special levy surprises!
5. Are the financial statements in order? Reading through the financial statements can tell you a lot about the management of the strata building! Has the strata corporation been running a surplus, or a budget deficit?
6. What is the rental ratio of the building? High rental ratios generally mean more absentee owners, and thus more work will fall on a smaller number of volunteers and management in some cases. Most tenants can be great, but a few bad apples can certainly spoil the bunch! Dig into these numbers prior to buying into a building!
7. Do you have a fairly steady Strata Council, or is everyone new and inexperienced? Some building have great Strata Councils, but others have a difficult time obtaining volunteers. If that’s the case, ask why, as perhaps there is a toxic culture in the building for some reason?
8. High turnover of strata management companies. If the strata corporation is turning over property management companies every year or two, you need to find out why? This can be a sign that the building owners difficult to work with, or perhaps something even worse. Be sure to dig even deeper if this is the case!
9. Strata fees too low! Many buildings will intentionally set their strata fees very low to improve their marketability to Buyers, but this is usually just smoke and mirrors, and can result in budget deficits and consistent special levies. Similar to taxes, the Government needs their revenues from somewhere, and so does the strata corporation in order to run a healthy building!

As you can see, there are quite a few things to look for when buying into a Vancouver area strata building! Please reach out to us here if you have any questions about strata management, or about buying strata real estate in general!