Advise Needed - Co-Op

Not that I don't trust my lawyer, I don't trust anyone elses.
I will get those financial statements, all they sent to my lawyer was 2005 and 2006 tax returns both showing approx $6000 loss, they haven't come up with 2007 yet.
I am ok without monthly meetings, but it seems difficult to find out all the details without some sort of meeting minutes, they have the past 2 months worth, but nothing more.
My lawyer is on it, and telling me to be careful, so that is why i post here to hear other peoples opinions.
maintenance was raised from $750 to $885 per unit, and $750 was already high it seems, and only 40% tax deductable.
there is an old oil boiler that needs replacing, and my biggest concern is that it has not been replaced yet, with the record high oil prices, does it take most co-ops 3 years of loss before they make a decision like this?

Posted by: steve37 at May 9, 2008 12:38 PM in response to Advise Needed - Co-Op

also does the co-op have to show me what each unit is paying per month to the co-op.
without the financial records, the rates don't add up to everyone paying a fair share for the amount of shares they own.

Posted by: steve37 at May 9, 2008 12:40 PM in response to Advise Needed - Co-Op

that's what i'm trying to find out, sounds like no, what is a good number for a 5 unit co-op?
I hear the number 50k from the brokers, but i don't trust them until i get the actual statement in hand.
been co-op'd since 79 with 2 originals still in the building, just want to make sure someone is not getting a free ride, and I am going to end up paying for it.

Posted by: steve37 at May 9, 2008 12:46 PM in response to Advise Needed - Co-Op

I have handed over all my financial yes, this is why i am taken a little aback that the co-op financials are so hard to get ahold of(tax returns aside)
we are putting nearly 40% down, so they shouldn't be too concerned about our share.

This all has very little to do with what i can afford, and more to do with asking the question is this co-op running correctly.
I don't care of the maintenance goes up to double the current rate, I care if the property i am buying into is mis-managed, and need a little help with the questions to ask.

This is my first home purchase in NYC, and co-ops don't exist anywhere but here, things are deffinatly not as cut and dry as a standard home purchase outside of the NYC area.

Posted by: steve37 at May 9, 2008 1:19 PM in response to Advise Needed - Co-Op

as far as boiler, I had an inspector come in, it still works, but is extremely in-efficient, also there is no hot water heater tank, all hot water is made from a boiler that has to be running full blast 24/7 basically.
With the costs of oil in the past few years, I would have thought to do something about this, that is why I question.
As for the maintenance, all shares are equal to all units, 5 units 20 shares each.
However the income of the co-op based on the tax records given to me, show a number clearly not divisable by 5, (gross reciepts) so that is why i have these burning questions in my head that someone is getting a free ride, and the fact that it is difficult to get the statements desired also makes me think someone is hiding something.

Posted by: steve37 at May 9, 2008 1:38 PM in response to Advise Needed - Co-Op

Funny thing is, i want to heave a place that isn't a highly regimented over the top kind of place, but I also want to know what i am getting into before I get into, and not after the contract is signed.

thanks for these questions to ask, i will get that process started asap.

Posted by: steve37 at May 9, 2008 1:56 PM in response to Advise Needed - Co-Op

2:14,
I am under the thought that your "book" of info should not be irregular, and should be the norm. As this is my first co-op and expected much more.
thanks for the info, am not walking away just yet, but am going to stand my ground to get the info i need.

Posted by: steve37 at May 9, 2008 3:07 PM in response to Advise Needed - Co-Op

Thanks,
we did get that book you speak of, but it doesn't have new info on it, such as the financials.

we did not get any current info on the property as 1:43 pointed out, so that is the stuff we are after.

Posted by: steve37 at May 9, 2008 3:39 PM in response to Advise Needed - Co-Op

3:36 so far there is only a 10,000 outstanding mortgage, will find out how long ago it was received.

Posted by: steve37 at May 9, 2008 3:41 PM in response to Advise Needed - Co-Op

4:01,
i agree completely, my biggest question is how to find out if it is mis-managed, or there are troublemakers, our lawyer today was able to get us in touch with the board president(without going through more lawyers or agents) finally a human to human conversation (sorry lawyers but you know your not human already), but still without those financials his word isn't much.

anyway thanks everyone, hopefull good news to come after talking to board pres.

Posted by: steve37 at May 9, 2008 4:08 PM in response to Advise Needed - Co-Op

Get the block and lot # and check the building on ACRIS. That will tell you how many of your fellow shareholders have mortgages or home equity loans and also the building's mortgage; if any of the mortgages were taken out in the past few years (and with the huge drop in rates in 2003-2005 the building *should* have refinanced their mortgage, unless they're about to pay it off). ACRIS will show the total face value of the building's mortgage, as well as the face value of recent sales in the building.

Also get your lawyer to check to see if there has been any litigation about the building (again, only the legal name of the co-op is needed). You can find out a lot of info about the building from public sources, but let me echo the comments above about getting the original offering book (please don't meditate on the prices).

I wouldn't worry about the absence of a hot water tank. Tankless hot water is supposed to burn less fuel, although I don't know about that.

But most of all be prepared to get on the board and start handling all the affairs of the building itself. Any small building you're really doing to have to consider yourself an owner.

Posted by: guest at May 9, 2008 4:00 PM in response to Advise Needed - Co-Op

don't disagree with any of the above. one addendum: try to find out why this place is (seems to be) mismanaged. are your business partners -- that's who the other shareholders are -- just not up to self-management, or are there 'trouble-makers' like 3:42 describes who are causing the problem (perhaps unconsciously)?

Posted by: guest at May 9, 2008 4:01 PM in response to Advise Needed - Co-Op

4:01,
i agree completely, my biggest question is how to find out if it is mis-managed, or there are troublemakers, our lawyer today was able to get us in touch with the board president(without going through more lawyers or agents) finally a human to human conversation (sorry lawyers but you know your not human already), but still without those financials his word isn't much.

anyway thanks everyone, hopefull good news to come after talking to board pres.

Posted by: steve37 at May 9, 2008 4:08 PM in response to Advise Needed - Co-Op

Our small co-op is in sort of the same boat. Good reserve fund, but heating oil is killing us. We've run a deficit last 2 years and jacked maintenance 15% (to $1 psf). Also, we keep lousy minutes, mostly because there are only 5 of us and we've agreed to do things on consensus/ad-hoc basis. (Except for maint. increases and capital improvements).

I wouldn't be too concerned. If the underlying mort. is as low as you say, and the reserve is around $100k, you should be fine. But, if you're uncomfortable with the lack of info., you should walk away or demand to have your lawyer review a few years' audited financial statements. Those are required and a skilled lawyer can read between the lines to find any red flags.

Posted by: guest at May 9, 2008 4:26 PM in response to Advise Needed - Co-Op

OK just made contact, good and bad news, seems like a few folks are just happy to be a bit lazy and don't take things to seriously, that's the good news, financials to come.
Bad news is reserver fund has fallen below 10k,
.
PLace doesn't need any work beside the boiler thing, but with next to nothing in the bank, how scared should i be?

Posted by: steve37 at May 9, 2008 5:06 PM in response to Advise Needed - Co-Op

If the reserve fund is 10K, and all the building's debt is 10K, if you paid off the mortgage with the reserve fund you'd have condo financing. Condos function witout reserve funds, after all.

Isn't there a budget prepared by an accountant? co-ops are NY corporations, they have to have at least one annual meeting a year at which financial reports are presented.

Posted by: guest at May 9, 2008 5:41 PM in response to Advise Needed - Co-Op

If the building has only 10,000 mortgaged, where is the 46, 000 that is coming in going to? Heat doesn't cost THAT much. I don't see how the building could be running at a loss. Check ACRIS.

Posted by: guest at May 9, 2008 7:01 PM in response to Advise Needed - Co-Op

Run dude. Only $10k in the bank? What if you need a roof. $10k doesn't cover that. What if the boiler busts? $10k will not cover that.

The building can't be THAT great that you'd still be talking on this blog about it. Get the fuck out of there.

Posted by: guest at May 9, 2008 10:53 PM in response to Advise Needed - Co-Op

I agree with 10:53.

I'm not sure why you're still listening to your attorney. If you are still unsure, you should get out now. Is your attorney going to live there? Of the small amount of information you got so far, the 10K mortgage is the only good thing.

Questions:
Is your 40% downpayment going to create a reserve fund? Is the party you're buying from paying a flip tax - Is THAT going to fund the reserve? Has the co-op imposed any special assessments? After your 40% tax deduction, where is the other 60% going - is it funding the reserve???

I think you get my drift. Having no reserve is not a good thing. Some co-ops impose assessments rather than raising the maintenace, since an assessment is immediate and maintenance is for the longer term. But since this place has no reserve fund and there are people living there for over 30 years, the co-op probably doesn't want to assess someone on a fixed income.

My last question: Since there is no reserve, the maintenance just went up, there probably won't be an assessment and the co-op has not refinanced, where is this co-op going to get a large amount of cash from quickly?

Posted by: ms sandy at May 10, 2008 2:19 AM in response to Advise Needed - Co-Op

OK the reason we are talking now, is because this is our dream place, exactly what we asked for the first day we went into the brokers office 2 months ago, we have seen tons of places and this is the one that fit's us perfectly.
the part that doesn't fit us perfectly is that i believe i am a smart business person, and buying into a poorly run business is not the best choice, however a place like this might be worth a little extra effort.
and my attorney is the one who raised the red flags, why wouldn't i listen to that? isn't that what we pay them for, to find out all possible problems with the prospectus and contract.
the only good thing is that the roof is a few years old and in good condition, boiler although inefficient is in good working order.

anyway thanks for all your responses, we are going to renegotiate our offer to reflect all the details left out. if they say no, oh well, and if they say yes, buying into a troubled business is not as bad of an idea.

Posted by: steve37 at May 10, 2008 9:37 AM in response to Advise Needed - Co-Op