What Should I Know About Planning and Executing Capital Improvements?

Posted on Thursday March 01, 2018

Nothing lasts forever. That includes elements of your community, from boilers and air conditioners to pool pumps and front gates. Replacement of any of these items, or adding new features to your property (a hot tub on the pool deck, for example) is considered a capital improvement because that work increases the value of the property. Capital improvements shouldn’t be undertaken lightly or on impulse.
 
A successful capital improvement project requires a lot of planning to ensure that things go as smoothly as possible. “Many boards find themselves delaying necessary projects or spreading them across multiple years because they don’t have the time or money to tackle them currently,” explains Perry Rohan, director of client relations at FirstService Residential. “This is a shortsighted approach. It is not an efficient use of time or money, and the solution is proper planning.”
 
What’s involved in proper planning? It starts with communication.
 
Why are you considering a capital improvement project? Is the project a necessary replacement? An investment in staying current or ahead of the competition? “When talking about capital improvement projects you have two categories of communities: those who are looking to maximize their budgets while making economical improvements and those who are trying to stay relevant,” said Bill Worrall, vice president at FirstService Residential. “These are very different motivations and thus require different approaches.”
 
Before investing money and time in a capital improvement project, take the time to survey residents and understand their wants, needs and priorities. Even when it comes to replacing essential infrastructure such as elevators and gates, it’s important to get resident feedback if there’s going to be a significant change to the design or function of the equipment. Examples include going to a self-serve guest access gate system instead of a staffed one or installing elevators that require fobs, fingerprint scans or facial recognition to gain access when they were previously open. Residents feel valued when they get to provide input, and the opportunity to do so diminishes conflicts down the road. Emphasizing how the improvement will enhance residents’ lifestyles will make it more palatable, especially if there’s a big price tag attached.
 
“Most capital improvement projects we see in our communities are ‘must haves,’ not ‘nice to haves,’” Anthony Gragnano, regional director at FirstService Residential, said. “Material changes to the property often require a positive vote from 75% of the membership, and that can be an obstacle. The solution becomes to take a necessary project a step further so it becomes a genuine improvement. It’s more palatable to an association to add a little extra budget to a ‘must have’ project in order to get a ‘nice to have’ improvement.”
 
If your community is managed by a professional property management company, ask them about similar projects in other communities they manage. If they are large enough, you should be able to see similar endeavors at a variety of budget points. Ask for a tour, ask to speak to board members about how the project went. If possible, ask to see projects at different levels of complexity:  one may be just new carpeting, another may include carpeting and hallways, and the next may include carpeting, hallways and lobbies. Compare costs among them to judge what a little extra investment may get your community.
 
Getting the numbers you need to advocate for a plan, along with the visuals of design options, requires doing the research about possibilities and getting quotes on multiple scenarios. Once that is obtained, that information must be successfully communicated to residents for their consideration.
 
Most people do best when they have something to look at before making a choice, so
FirstService Residential regional director Milly Caraballo suggests a standard procedure to get started: “I always recommend that boards hire a designer, let them tour the property, provide ideas, and present them to the membership or give them something to look at and possibly vote on.”
 
“We often recommend that the building host an owners’ informational meeting. Then we bring in the vendors and engineers and provide an open forum for residents to ask questions,” explained Bobby Knuth, regional director at FirstService Residential. “The goal is for owners to feel involved, understand the scope of the project and get an idea of what to expect as the project proceeds. Then we summarize what was discussed and share it with everyone who was not able to attend.”

Once you’ve solicited resident feedback, presented them with options and gotten buy-in, the last critical piece of communication is to keep the community updated throughout the project, especially if (when) there are delays or complications.
 
Moving into the planning of the nuts and bolts of the project, start by prioritizing the work that you need to do versus the work that you want to do. You may want to resurface your pool and build a new deck, but if something else needs attention that poses a risk to residents, that should take precedence.
 
Determine a general timeline. If your residents are largely seasonal, consider trying to complete capital improvement projects in the off-season so that residents return to an improved property. The off-season is also summer, which is the rainy season in much of Florida, so build in weather delays accordingly. If your residents are not seasonal, you may be better able to complete needed work in the dry season (winter).
 
Look at your reserves and other funding options. Your reserve fund should always be the starting point for replacement of essential equipment. Hopefully, your reserve study and assessments have aligned so that you have the money on hand to replace things like HVAC equipment and pool pumps without needing to seek a loan or levy an assessment. If your reserves aren’t sufficient, a quality property management company will have the relationships to help you identify possible funding sources.
 
Once you know what you want to do and how you can pay for it, hire a project manager, usually a licensed engineer, who has the knowledge to inspect contractor work and keep the project moving on schedule. Don’t look to your property manager to be your project manager. Your property manager needs to be able to continue running your property, overseeing your budget, paying your bills and making sure that preventative maintenance is done properly. Bringing in a professional project manager with expertise in construction projects is the best option when embarking on a large capital improvement project.

As soon as your engineer is on board, start soliciting bids and vetting vendors. A quality property management company will have a slate of vendors, reliable and vetted, to help get you started with this process. If that company is large enough, they will be able to look at a similar project being done in a comparable community and get ratings from that community about the vendors they used, how the process went, tips they can share and more. Your professional project manager will also have the skill set and knowledge to help with the vetting process.
 
Be prepared for the unexpected. One change, installing a new elevator for example, may lead to another necessary change, such as upgrading the fire panel. Changing the floor tiles in an elevator may change its weight, requiring new testing and certification. You may tear out a wall and a city inspector will recommend or require other work be done to bring an area up to code. Cosmetic changes rarely end up being cosmetic changes, and again, a professional engineer is the best person to guide your association through that process.
 
Capital improvements, large or small, are part of managing an association, whether a high-rise building, master-planned community or something in between. They are costly, but neglecting or delaying needed improvements will only cost more in the long run. A professional property management company should have the experience, depth of resources and knowledge to help your association get through a capital improvement project from planning to execution with as little trouble as possible.
 
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