A Capital Improvements Plan for Your Tennessee Association

A survey conducted by FirstService Residential found that more than 83% of associations said they are investing in capital improvements, with 20% explicitly focused on adding or enhancing amenities. As a board member, one of your primary responsibilities is to make decisions and policies that enhance property values, so you should proactively invest in capital improvements. Capital improvements are necessary to build your reputation, increase property value, and enrich the resident experience. These can include replacing essential equipment like boilers, air conditioners, and front gates and adding new features like rooftop cabanas on the pool deck.

“One of the first tasks we take on when partnering with a new property is determining where the board and community stand on capital improvement projects,” said Joe Padron, regional director at FirstService Residential. “Once we help the board solidify the association’s objectives and where they are on reserves, we can then determine a solid and effective plan from there.”

So how do you plan and execute capital improvement projects in your community or high-rise?

1. First, choose the right capital improvements for your association (and residents).

Make sure you are embarking on the right projects and for the right reasons – before making a potentially large investment. Ask, why are we considering a capital improvement project? Is the project a necessary replacement? Is the goal to ensure the structural integrity of a building? Is it an investment that will help you stay current or ahead of the competition? “When talking about capital improvement projects, you typically have two categories of communities: those who are looking to keep costs low while making improvements that will maintain the property and those who are trying to boost their reputation and relevance by strategically investing in the latest amenities and property enhancements,” said Anthony Gragnano, vice president at FirstService Residential. “These are very different motivations that require different approaches.” 

Take the time to survey owners to understand their wants, needs, and priorities before investing time and money in a capital improvement project. When replacing essential infrastructures, such as elevators and gates, it's important to gather resident feedback if there will 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 new elevators that will require key or biometric access. Residents feel valued when their input is considered, and gathering it now can help mitigate conflicts in the future. Highlighting how the improvement will enhance residents’ lifestyles will make it more palatable, especially if a big price tag is attached to the project.  

Watch a video to hear what steps you need to take before you embark on a capital improvement project.

2. Second, explore project details and requirements with your fellow board members and management company.

If a professional property management company manages your community, ask about similar projects it has managed in other communities. An experienced management company with an extensive portfolio of properties (both local and national) will be able to provide examples at different budget levels. Ask to see the finished projects in person and speak with board members of those communities to learn how the project went. Ask to see projects at varying levels of complexity. For example, one project may involve new carpeting, another may involve carpeting and hallway renovations, and the next may involve carpeting, hallway renovations and lobby updates. Compare costs to judge what a little extra investment can do for your community.

Explore the details and requirements of your project, including pricing, design options, and a rough timeline – and the project manager who will get the job done on time and within your budget. Once your board has determined the best options, it must communicate that information 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.

Keeping the community informed throughout the project, especially if there are delays or complications, is important after you have solicited feedback, presented options and received buy-in.

“One of the communities we manage was considering levying a special assessment to fund a capital improvement project – upgrading the floor of a common area to marble,” said Padron. “We worked closely with the board to communicate the project plan to residents and ask them for feedback for the board to consider before making their final decision.” Including residents in the process is always a good idea – regardless of the final outcome.

3. Third, determine your funding options.

Before making any plans, make sure you have the funds to complete the project successfully. Begin by reviewing 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, your property management company and financial provider should help you identify possible funding sources. The laws that govern association reserves may change rapidly as legislatures respond to changing market conditions. This article is not meant to be legal advice on how to fund and maintain your reserves. If you have questions about your association’s reserves, check with your professional property management partner and your association attorney. To learn more about the new requirements, read our article.   

“Many communities think they don’t have the funds to even consider a capital improvement project, but there are different funding options that, in the long run, can make real sense for them. They just don’t know about them,” said Gragnano.
 
Once you’ve landed on the right funding options, it’s time to get to work.

4. Fourth, bring on your project manager.

Once you know what you want to accomplish and how you will pay for it, bring in your project manager. The project manager is key to the success of your project. They are usually a licensed engineer, with expertise in construction projects and the knowledge to inspect contractor work and develop a timeline to keep the project moving on schedule. Don’t look to your property manager to be your project manager. Your property manager isn’t licensed or qualified to do this very specialized type of work. Plus, they must continue running your community, leading your staff, overseeing your budget, paying your bills and making sure that preventive maintenance is done properly.
 
When your project manager 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. Because of FirstService Residential’s vast portfolio and presence in all of North America – associations are able to see examples of capital improvement projects in comparable communities or high-rises and get valuable tips and best practices on how to select the right vendors. Your professional project manager will also have the skill set and knowledge to help with the vetting process.
 
With guidance from your association manager, vendors and a project manager for capital improvements, develop 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.  

5. Fifth, finalize the project details, including project manager, board, management company and vendor responsibilities.

Many board members are understandably hesitant to take on capital improvement projects on their own. However, with the right management company and project manager on your side, you can look to them to help facilitate the capital improvement project, from concept to communication and everything in between. Danny Ellis, president at FirstService Residential, said “Property managers will work with the board to determine a scope of work, collect bids, present bids to the board and help negotiate contracts. We do whatever makes the job go more smoothly, including making sure that bills are paid on time. We also work closely with your project manager, ensuring that they have the information, tools and support they need to get the job done properly.”

6. Finally, expect the unexpected.

Remember that even if you plan every detail, select the right vendors, communicate thoroughly and fund your capital improvement – the unexpected can happen. For example, installing a new elevator may lead to another necessary change, such as upgrading the fire panel. Updating 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 often end up being more than 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, regardless of what type of community you’re leading. They may be 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 successfully plan and execute capital improvement projects.