Why sinking funds are important in your residential block (the “hidden time bomb”)

For most people that own a property, there are times when you wished you saved some extra money each month for when the washing machine unexpectedly goes on the blink! You’re left with a hefty bill and debts to pay off to replace it.

It’s the same for when you are in a managed block. Unexpected expenses are no fun for anyone, which is why a ‘sinking fund’ is important for residential managed properties.

Good managing agents will have this covered. Planning ahead regular maintenance and repairs to your property and foreseeing adhoc expenditures so they are included within the maintenance charges. There are no surprise bills given to you throughout the year – the sinking fund has enough money in there to pay the expenses when required.

We’re not talking about putting money aside just for the sake of it, but for good agents, they will know a realistic amount that you will require for the larger jobs.

For example, if your property is painted, it is often required in the lease to paint and repair the property in a certain time frame. Money for the scaffolding, labour and paint should have been collected throughout the previous years so the lessees do not have to put extra money in on top of what they already contribute.

It also means that in a years’ time when you unexpectedly need to repair the lift, you may have to put an extra amount towards this, but you would have reduced the lump sum payment dramatically by contributing previously.

Without having this fund, it’s like a hidden time bomb! With any type of property, whether it is your own house, or managed flat, there are always going to be instances that no one can predict. By having a sinking fund, you will at least be in a better position to manage the budget accordingly and not cause difficulties for the tenants and landlords of the properties.

Sinking funds can also take time to build – for new properties, or properties whereby agents have taken over accounts, there may be no ‘extra’ money collected each month. Rather than increase maintenance charges dramatically, sinking funds can be built over time.

If you are unaware if your agent is collecting a sinking fund for your property, make sure you ask the question! If you would like us to manage your property for you – don’t hesitate to call – we’d be happy to chat. Call us now 020 8866 0001 or drop us an email.

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