NYC Buyer’s Guide to Building Financials: How to Evaluate a Co-op or Condo’s Health
Understand NYC co-op and condo building financials—from reserve funds and arrears to due-diligence findings that shape long-term stability and buyer decisions.
When you buy a co-op or condo in New York City, you’re not just purchasing a home—you’re buying into the financial health of an entire building. A unit may look perfect, but its long-term stability depends on how well the building is managed, how predictable its expenses are, and whether it has sufficient reserves for future repairs. That stability directly affects monthly carrying costs, the risk of special assessments, and your eventual resale value.
It’s important to note that a buyer’s real estate attorney is responsible for performing the formal legal and financial due diligence. Your attorney will review the building’s financial statements, the offering plan and amendments, board minutes, bylaws, and other governing documents. Buyers can also review these materials independently, and a real estate agent supporting the process should provide guidance, context, and comparative insights.
Building financials can look dense at first, but the core concepts are straightforward. The goal is to understand how the building generates and allocates funds, whether its reserves are sufficient to meet long-term capital needs, and whether any potential red flags could impact ongoing costs. Below is a clear, practical overview of what NYC buyers typically review during due diligence.
1. How to Read a Building’s Balance Sheet
The balance sheet provides a snapshot of the building’s financial position at a specific moment. It outlines what the building owns, what it owes, and what remains after expenses—its net financial health. Buyers generally focus on three components:
Assets: cash on hand, reserve accounts, prepaid expenses, and any receivables owed to the building.
Liabilities: accounts payable, accrued expenses, and short-term obligations.
Fund balance/equity: the difference between assets and liabilities, showing overall financial strength.
Healthy buildings typically show:
Positive cash balances
A meaningful reserve fund
Manageable short-term liabilities
Predictable receivables with low arrears
You don’t need to analyze every line item, but understanding the building’s net position helps clarify whether it’s prepared for both day-to-day operations and long-term capital needs.
2. Revenue: How the Building Generates Income
Most NYC buildings depend primarily on monthly common charges (condos) or maintenance fees (co-ops). Strong, predictable revenue helps maintain stable monthly costs and reduces the likelihood of assessments. Common revenue sources include:
Common charges or maintenance fees
Parking or storage fees
Laundry or amenity income
Commercial or retail rents (in mixed-use buildings)
Interest earned on reserve accounts
Buyers look for revenue that is:
Stable year over year
Sufficient to cover operating expenses
Not overly dependent on one irregular source
Free of large gaps or shortfalls
If revenue drops or remains flat while expenses rise, the building may need to adjust monthly charges in the future.
3. Expenses: How the Building Spends Its Money
The expense statement outlines the building’s operating costs—everything required to keep the property functional, safe, and well-maintained. Typical categories include:
Staffing and management
Insurance
Repairs and maintenance
Utilities
Legal and professional services
Cleaning or janitorial services
Elevator or mechanical system contracts
Buyers aren’t expected to evaluate each line item, but it’s important to look for patterns:
Are expenses increasing significantly year over year?
Are repair costs unusually high (which may signal aging systems)?
Are insurance premiums rising sharply (common in recent NYC markets)?
Does spending appear consistent with buildings of similar size and age?
Predictable, well-managed operating expenses are a sign of strong building oversight.
4. Reserve Fund Strength: The Building’s Long-Term Savings
The reserve fund is used for major capital repairs—roof replacements, façade work, boiler upgrades, elevator modernization, and other large-scale projects. It’s the building’s long-term safety net. Buyers typically look for:
A meaningful reserve fund relative to building size
Consistent funding or contributions
Controlled withdrawals that align with planned projects
No signs of chronic depletion or neglect
While there is no universal standard for how much a building “should” have, low reserves increase the risk of special assessments—one-time charges levied on owners to pay for major repairs.
5. Arrears and Collections
Accounts receivable—unpaid common charges or maintenance fees—give buyers a sense of how consistently residents are meeting their monthly obligations. A small amount of arrears is typical, but when the balance is unusually high or increases year over year, it may indicate cash-flow challenges or operational strain. Buyers generally look at how receivables trend over time and whether the total amount is material compared to the building’s overall revenue. These patterns help reveal whether the building operates with reliable, predictable income.
A building with low and stable receivables usually reflects stronger financial discipline and more effective collection practices. For buyers, this stability helps reduce the likelihood of unexpected financial pressure on the building and supports predictable monthly costs over the long term.
6. Notes & Footnotes: Important Details Often Found Here
The footnotes at the end of the financial statements often contain the most important details—information not visible in the primary tables. These notes may include:
Whether the building has completed a reserve study
Planned or deferred capital projects
Special assessments (current or upcoming)
Litigation or insurance claims
Tax strategies or elections (e.g., condo/HOA filings)
Management changes
Details about significant contracts or obligations
Buyers should always review these sections carefully (or have their agent do so). They provide critical insight into future financial risks.
7. Operating Cash Flow: Surplus or Deficit?
The cash flow statement explains how the building’s cash position changed throughout the year. It distinguishes between operational activity, investment activity, and reserve changes. Buyers look for:
Positive cash flow from operations
Stable or growing total cash reserves
A pattern of financial consistency over multiple years
A one-year deficit is not always problematic—major repairs or one-time costs can temporarily outweigh income. But recurring deficits or declining reserves may indicate larger structural issues.
8. What “Healthy” Building Financials Look Like
While every building is unique, financially stable buildings typically show:
Adequate reserve funds
Predictable, diversified revenue
Reasonable, stable expenses
Low arrears or delinquencies
Clear documentation of capital planning
Minimal or no litigation
No history of frequent or large assessments
Consistent year-over-year financial performance
Taken together, these signs suggest a building that is well-run, properly funded, and positioned for long-term stability—key factors for both ownership peace of mind and future resale value.
9. Role of Your Real Estate Agent
While a buyer’s real estate attorney is responsible for conducting the formal legal and financial due diligence, an experienced real estate agent also plays a valuable supporting role in the process. A proactive agent is familiar with the financial position of the building and can help the buyer understand how the building’s stability aligns with the apartment itself—considering layout, condition, resale potential, and broader market context.
Agents don’t replace the attorney’s analysis, but they help interpret how the attorney’s findings relate to the buyer’s goals, timeline, and long-term strategy. Throughout due diligence, the agent remains in communication with the buyer and attorney as appropriate, ensuring everyone has the information they need for a confident, well-supported decision.