Each building is like a different company, lets say a publicly traded company for arguments sake. Some publicly traded companies, like for instance INTEL CORP. (NASDAQ: INTC), owns a great place in the market for semiconductor chips which can be analagous to owning an apartment in a great location of NYC; lets say 84th & Madison Avenue. Chances are, this will not change unless an outside force, such as a natural disastor should hit the area.

The marketing and branding that INTEL spends so much money on, can be analgous to the outside appearance of the building, or building amenities. Is the lobby extravagant? Is there a roof-deck? Gym? Doorman? Well, you get the picture.

Finally, the quarterly earnings report that INTEL releases every 3 months can be directly compared to the 2 years of financial statements that the buyer's attorney will go over before advising you to SIGN THAT CONTRACT!! Needless to say, I hope you have a INTEL type of report, rather that one that resembles ENRON or WORLDCOM!!

Starting to make sense to you?

The building's maintenence fees have a direct relationship with the financial health of the building you are about to buy in. If there were major repairs recently on the building such as roofwork or facade repair, than chances are the operational costs of these projects took a nice chunk of change out of the building's reserve fund. For all you first timers out there:

BUILDING RESERVE FUND: Monies put aside by the building, and paid by the owners or shareholders, to be used to pay for the overall maintenence and upkeep of building and its services. Building amenities such as a 24HR Doorman, gym, or roofdeck, will increase the overall costs of running the building and these services.

TIP: The building should have at least 4 months worth of overall monthly building expenses in the reserve fund for future repairs. Anything less, raises a red flag, and leaves the board little options OTHER THAN charging a maintenence assessment at some point down the road!!

For me, I like to use the following formula for assessing whether or not an individual apartment's maintenence charges are a signal of strong financial sense.

MAINTENENCE FEES/TOTAL SQUARE FEET

For instance: A 800 Sq. Ft. 1 Bedroom apartment in a Co-op Building Charges $760/Month in Maintenence.

760/800 = 0.95

NOW YOU TRY IT AT HOME & USE THIS GRAPH AS A GUIDE!

LOW MAINTENENCE/STRONG BUILDING FINANCIALS = UNDER 1.15
AVERAGE MAINTENENCE/AVERAGE BUILDING FINANCIALS = 1.15 - 1.65
HIGH MAINTENENCE/WEAK BUILDING FINANCIALS or UNDERLYING ISSUES (such as a landlease) = OVER 1.65

*NOTE #1: Since Co-op Maintenence Charges include your real estate taxes, you must COMBINE the monthly carrying charges (CC) and the real estate taxes when calculating for CONDOMINIUM's.
**NOTE #2: Just because you came out with a figure over 1.65, using that formula, doesnt mean your building is about to go down the toilet! There can be a number of reasons for this, such as recent building work done that led to a temporary monthly assessment. It just means that the VALUE of the property poses a risk at resale, due to the high monthly costs, and will result in a lower purchase price than apartments that have a maintenence score under 1.0.

In the end, you MUST buy the best VALUE FOR YOUR MONEY, that has the best chance for APPRECIATION IN RESALE, come time for you to sell.