3 Benefits of Sinking Fund Forecasts for Strata Buildings

If you're responsible for running a strata building, then you must factor in ongoing and one-off costs for work on the building itself and its communal areas. This includes regular planned maintenance work, like painting, and emergency jobs that can arise at any time.

Your strata's sinking fund handles these costs. Your owners all contribute to this fund at set times. However, for this to work, you must decide how much money the fund needs to hold at any given time.

While you can do this yourself in tandem with your owners, it may pay to commission a professional forecast. Here, you hire the services of a building specialist, such as a chartered surveyor, to create the forecast for you.

What are the benefits of hiring a professional to do this job? Read on to learn more.

1. Get qualified advice

If you've been responsible for your strata building for a while, then you may feel that you have some experience that helps you forecast future costs. However, this might not be enough to produce a robust sinking fund forecast.

These forecasts should include corrective, predictable and emergency maintenance costs over a set period of time. You may not have the in-depth knowledge to cover all these areas.

For example, you may already know that the exterior of your building will need painting in the next 12 months. You can estimate these costs based on previous work and current quotations.

However, you can't necessarily identify underlying structural problems that might need remedial work in the future. You can't predict that a major storm in the next few months will seriously damage your roof.

If you commission a professional forecast, you tap into the skills and experience of a qualified building professional. They help you set out the regular jobs that will need to be done in the forecast period; they also help you determine a schedule of work and estimated costs.

Plus, they will help you identify problems you may not know about yet. They can also give advice on insurance coverage so that you can make claims for accidental damage or emergency costs wherever possible.

2. Maintain the right amount of funding

In an ideal world, your sinking fund should contain enough money to cover scheduled work and any emergencies that arise. However, it's hard to estimate the right amount of funding given that some of your expenses will be unpredictable.

If you don't have enough money in your sinking fund, then you might not be able to cover all your expenses. You may have to ask your owners to make additional payments.

On the other hand, if your fund is too big, then you take more money than you'll spend from your owners. This isn't likely to go down well with them.

When you run a professional forecasting exercise, you get a clearer idea of the actual costs of planned and unplanned outlays based on expert advice. You can set up funding that covers regular costs with some excess for contingencies. This gives you an adequate and healthy sinking fund balance.

3. Get buy-in from your owners

If your sinking fund works at optimum levels, then your owners don't pay more than they need to. They also don't have the stress of unexpected expenses if something goes wrong.

This helps you maintain good relationships. People will also be happier if you set aside funds to do work that they see as essential, such as keeping the building and its communal areas in a good condition.

You may also find that owners are more willing to ratify your forecasts at your annual general meetings if your figures are based on expert advice. Some owners will accept fund costs more readily if they are set independently.

If you want help creating a sinking fund forecast, then contact Building & Project Services Pty Ltd. We can help you assess how much money you need to set aside to keep your strata building in the best possible condition.