How Can My Community Plan and Execute Capital Improvement Projects?

Posted on Friday March 02, 2018

Nothing lasts forever. That includes elements of your community infrastructure, from pool pumps and front gates to boilers and air conditioning units. Replacement of any of these items, or adding new features to your property, 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. They are usually complex in nature, costly and a lot of work. Some communities try to delay needed work because they are short of funds or time, and that approach will cost more in the end. Making sure you have an accurate reserve study and well-funded reserve that is carefully invested will ensure that you are ready when projects rear their heads.
 
“When we take over the property management for a property, I always ask where we are on reserves, where we need to be based on upcoming projects, and then if there's a gap, help the board determine a reasonable plan to get to where we need to be,” explained Bradley White, regional director at FirstService Residential.  “I suggest that every January, all managers look at their capital improvement project lists for the year and plan to discuss those projects in their January or February board meeting.” Start to plan from there: defining the scope of work, getting bids, getting an updated reserve study, who is going to do what.”
 
Once that happens, what’s involved in proper planning? It starts with communication to the association membership.
 
Why are you considering a capital improvement project? Is the project a necessary replacement? An investment in staying current or ahead of the competition? These are points that you need to be prepared to discuss.
 
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. 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.
 
“I had one community that was entertaining the idea of a special assessment for a capital project, but before doing it, they surveyed the residents,” White said. “The board told residents that they would like to upgrade a common area floor to marble, but in order to do so that would mean a special assessment of a certain amount. Residents gave their feedback before the decision was made.” Regardless of the final outcome, resident input makes that decision easier for a board to justify.
 
Communicate to residents through every possible channel: social media, newsletters, TV screens, email, posted flyers. A mass communication tool such as FirstService Residential Connect makes that process easier on every level.
 
“It’s not always a matter of whether or not they should do a project, but whether it is the most pressing item to tackle with limited reserves,” said Ashley Pafford, director of client relations at FirstService Residential. If your budget only allows for “must have” capital improvements, see if you can expand that necessary work to become a genuine upgrade. If you have to redo the pool deck because it’s become worn and slippery, see if the same company can resurface the pool or upgrade the finish of the deck for just a bit more of an investment.
 
If your community is managed by a professional property management company, ask them about similar work being done in other communities they manage. If they are large enough, you should be able to see similar projects at a variety of budget points. Ask for a tour and interview 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 gauge what a little extra investment may garner for 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. Host an owners’ informational meeting where the designer, architect and/or engineer can present their ideas and provide an open forum for residents to ask questions. 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. Make sure to summarize the discussion and share it with owners who were 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. Think about the time of year that you want to have your project completed, and how long it will take. Is seasonality of your residents a factor? Then try to complete work when most of them are not living onsite. Think about fall rain, winter sleet and spring thunderstorms and build in reasonable delays for weather. If you plan to open your pool in May, then you need to start with planned open date and backtrack from there to figure out a start date for the work.  
 
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 elevators and gate systems without needing to seek a loan or impose a special assessment. If your reserves aren’t sufficient, a quality property management company will have the relationships to help you identify possible funding sources including loans.
 
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.
“One problem I’ve seen with capital improvement projects is when a board expects the property manager to also be the project manager. We are there to oversee that everything runs smoothly, but we need to prioritize managing your community,” explained Joe Padron, regional director at FirstService Residential. “It’s best to bring in a professional who has the time and the specialized knowledge to conduct inspections.”

So don’t look to your property manager to be your project manager. Your property manager needs to be able to continue running your property, 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 beginning a capital improvement project. That person will have the skill set to inspect contractor’s work and make sure that it is being done properly and meeting all codes.
 
Once you have a project manager in place, start soliciting bids and vetting vendors. A quality property management company will have a roster of reliable, vetted vendors to help 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 find out from that community more information about the vendors they used, how the process went, tips they can share and more. Your project manager will be a valuable resource in the vetting process as well.
 
Prepare for the unexpected. One change may inadvertently lead to another. Changing the floor tiles in an elevator may change its weight, requiring new testing and certification. You may tear out a wall or lighting fixtures and find out that other work needs to be done to bring that up to code. Cosmetic changes rarely end up being just cosmetic changes, and again, a professional project manager is the best person to guide your association through that process. “Surprises always come up, but we take them as opportunities to learn for the next project,” White said.  
 
Capital improvements, no matter the size of the project, are part of managing an association, whether a high-rise building, master-planned active adult community or something in between. They can be costly, but neglecting or delaying needed improvements will only cost more in the long run. A quality 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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