Buying a Cambridge condo is exciting, but the smartest move you can make is reading the association budget like a seasoned analyst. The budget tells you what your real monthly costs will be, how well the building is cared for, and whether a special assessment could be around the corner. If you know what to look for, you can price risk, negotiate with confidence, and avoid surprises. This guide shows you how to review a Cambridge condo budget step by step so you can buy with clarity. Let’s dive in.
The three parts of every condo budget
You will see three core pieces that work together. Each serves a different purpose and signals different risks and opportunities.
Operating budget basics
The operating budget covers the recurring, short-term expenses that keep the building running each year. Typical line items include management fees, master insurance premiums, utilities for common areas, routine repairs, landscaping, snow removal, elevator service, trash, cleaning, and professional fees. It also forecasts income such as regular assessments, parking income, and interest.
Focus on trends. Look for large year-over-year increases in insurance, utilities, or management fees without clear explanations. A budget that relies on reserves to cover an operating deficit is a red flag. Healthy operations usually show a small surplus and at least 1 to 3 months of operating expenses in cash.
Reserve fund essentials
The reserve fund pays for predictable, non-recurring capital replacements such as roof work, masonry, elevator overhauls, and boiler replacement. A strong association funds reserves according to a current reserve study that lists components, remaining useful life, and estimated replacement costs.
Red flags include a reserve study older than 3 to 5 years, very low reserves compared to near-term projects, or reserves being used for routine operating expenses. Ask where reserves are held and confirm balances with bank statements.
Capital plan and funding strategy
The capital plan maps large projects and timing over 5 to 30 years and explains how the association plans to pay for them through reserves, special assessments, or loans. Compare the plan to current reserve balances and the annual contribution. If reserves and planned contributions do not cover upcoming projects, a special assessment or borrowing is likely.
Cambridge-specific cost drivers to know
Cambridge, and the broader Cambridge–Newton–Framingham area, has unique factors that shape condo budgets and risk.
Building age and historic context
Many Cambridge buildings are pre-war brick or wood-frame conversions alongside newer mixed-use developments. Older buildings often face higher capital needs for roofs, masonry repointing, older plumbing, or window systems, and they may be subject to historic design review. If a building sits in a historic district, approvals can add time and require higher-cost materials, which should be reflected in capital planning.
Climate, snow, and masonry
Freeze-thaw cycles and winter storms push up costs for snow removal and sidewalk care and accelerate wear on roofs, masonry, and pavement. Expect to see snow removal and seasonal maintenance clearly budgeted. Repeated small roof repairs may signal a larger replacement is approaching.
Heating systems and utilities
Many multiunit buildings use centralized boilers. Boiler replacement is a major capital item that should appear in the reserve study. Review how utilities are billed. If heat or hot water is included in fees, your monthly carry cost will be higher, but an energy-efficiency upgrade may lower long-term expenses. If utilities are metered to each unit, the operating budget should still show common-area costs.
Elevators, parking, and storage
Elevators require ongoing service contracts and eventual modernization. Garage repair and repaving can be significant capital projects. If there is income from parking or storage, make sure there is a matching maintenance budget and that the income assumptions are realistic.
Insurance and code-driven costs
Master insurance is a major line item and can be volatile if there were prior claims or underwriting changes. Larger deductibles can shift risk to owners after a claim. Code upgrades required by inspectors or after a loss can introduce unplanned expenses. Ask for the insurance declarations page and any known claims in the last 3 to 5 years.
Lender expectations
Many lenders review project finances, including reserve levels, delinquency rates, and owner-occupancy ratios. If a building does not meet program criteria, the pool of buyers can shrink. This can affect resale value and financing timelines, so confirm expectations with your lender early.
What to request before you commit
Ask the trustee or manager for documents that let you read both the day-to-day picture and the long-term plan.
- Current year adopted operating budget and most recent year-end actuals
- Latest reserve study and any updates, including component list and recommended annual contributions
- Reserve and operating bank statements for the last 3 to 6 months
- Board meeting minutes for the past 12 to 36 months
- History of special assessments and any active loans
- Delinquency summary with number of units over 60 or 90 days
- Insurance declarations page with limits and deductibles
- Contracts for major vendors: management, elevator, landscaping, snow removal
- Recent engineering or inspection reports and relevant permits
- Master deed and bylaws for reserve and assessment rules
Quick financial checks that surface risk
These simple checks help you spot issues early and decide where to dig deeper.
- Operating cash: at least 1 to 3 months of expenses on hand is prudent
- Reserve study recency: older than 3 to 5 years requires caution
- Reserve balance vs near-term projects: low balance with looming work suggests assessments or loans
- Fee changes: steady small increases are normal; a single 10 percent jump requires explanation
- Delinquencies: rising rates or multiple units over 60 to 90 days strain cash flow
- Special assessment history: repeated assessments over 5 to 10 years suggest chronic underfunding
- Insurance shock: big premium spikes or very high deductibles can lead to future assessments
How to read a budget line by line
Use this approach to translate numbers into a clear risk picture.
Management fees and professional costs
Confirm whether the management fee is flat or tied to income, and whether collections or after-hours calls are extra. Legal and accounting often spike when there are collection issues or disputes. A routine audit or review is a good sign of governance discipline.
Insurance and utilities
Insurance shifts year to year. Ask about claim history if you see a large jump. For utilities, confirm which services the association pays and which are metered to units. If heat is included in fees, review fuel and maintenance lines and ask about energy upgrades planned in the capital plan.
Repairs, maintenance, and contracts
Separate routine repairs from capital projects. If the budget shows repeated “roof repairs,” that may indicate a full replacement is due and should appear in the reserve plan. For elevators, confirm the service contract and modernization timeline.
Reserve contributions
Compare the budgeted reserve contribution to the reserve study recommendation. Healthy associations follow the study’s schedule or explain any shortfall with a clear plan. If reserves plus future contributions will not cover near-term projects, expect an assessment or a loan.
A simple example, explained
Consider an illustrative 24-unit Cambridge association. Total annual income is 150,000, with 144,000 from assessments and 6,000 from other income. Operating expenses total 100,000, covering management, insurance, utilities, maintenance, elevator service, landscaping and snow, trash, legal and accounting, administrative costs, and a small contingency.
The budget sets a 30,000 annual reserve contribution, matching the reserve study. That leaves a 20,000 surplus after reserves. The reserve fund starts the year at 45,000, adds 30,000, and plans a 10,000 draw for minor masonry work, ending at 65,000.
Now test the capital plan. If the main roof is estimated at 180,000 in the next 1 to 2 years and a boiler at 60,000 in year 3, current reserves are not enough. Without a loan, a special assessment is likely unless contributions increase sharply. That is how you translate a tidy budget into a forward-looking risk profile.
Smart questions to ask the board or manager
- When was the last reserve study completed and when is the next one scheduled?
- What is the current reserve balance, and where are funds held?
- What capital projects are planned in the next 1 to 5 years and how will they be funded?
- Have there been special assessments or loans in the last five years? If yes, for what and how much?
- What percent of assessments are currently delinquent and how many units are over 60 or 90 days?
- Have there been recent insurance claims that affected premiums or deductibles?
- Are there any code violations, building orders, or historic requirements pending?
How budget insights shape your offer
Your budget review should inform price, timing, and contingencies. If a major project is near and reserves are thin, factor a potential assessment into your valuation. If delinquencies are high, discuss lender implications and close timing with your mortgage advisor. If the operating budget is tight with little cash, be ready for fee increases in the next cycle.
For due diligence, consider a document contingency that allows time to review budgets, reserve studies, minutes, and insurance. Align your closing timeline with any known assessments or project schedules.
Your next steps
- Gather the documents listed above as early as possible
- Walk through the operating budget, reserve study, and capital plan side by side
- Compare reserve balances to near-term projects and confirm funding sources
- Clarify utility billing, insurance deductibles, and any recent premium changes
- Coordinate with your lender on project eligibility and underwriting needs
If you want senior counsel to vet an association’s financials and help you price risk, connect with The Whaley | Ring Team for a confidential market consultation.
FAQs
What is the difference between a condo’s operating budget and reserve fund?
- The operating budget covers recurring yearly costs like insurance, utilities, and maintenance, while the reserve fund is set aside for non-recurring capital replacements such as roofs, boilers, or elevator overhauls.
How much operating cash should a Cambridge condo association keep?
- A prudent target is at least 1 to 3 months of operating expenses in unrestricted cash to cushion short-term fluctuations and avoid tapping reserves.
How often should a reserve study be updated for a Cambridge building?
- Best practice is every 3 to 5 years, with updates after major projects or cost changes so annual contributions stay aligned with real needs.
What are signs a special assessment may be coming?
- Low reserves relative to near-term projects in the capital plan, an outdated reserve study, repeated small repairs on failing systems, or a sudden jump in insurance costs without matching reserves.
How do utilities affect my monthly condo fee in Cambridge?
- If heat or hot water is included in fees, your monthly cost is higher but more predictable; if metered to units, the fee may be lower, but you pay utilities directly and common-area costs remain in the operating budget.
What delinquency levels should I worry about as a buyer?
- A rising trend or multiple units over 60 to 90 days past due can strain cash flow, force fee increases, and trigger lender concerns about project eligibility.
