What is a Reserve Fund for Repairs?
What is the reserve fund for repair of condominiums? Will there be a price increase in the future?
Mortgages aren't the only things you pay monthly after you buy an apartment. After purchase, you will also have to pay a management fee and a reserve for repairs. Moreover, the reserve fund for repairs may be raised, so once it is decided, it will not end. Therefore, in this article, we will explain what the repair fund is used for, and then introduce the market price of the repair fund and the reason why the price increases.
What is a reserve fund for repair?
In the case of a condominium, you have to pay a management fee and a reserve fund for repair in addition to the mortgage each month after purchase. Briefly, the management fee is a monthly fee paid by the resident to the management company for the daily management of common areas. The reserve fund for repairs is for the tenants to save the expenses through the management association in preparation for the maintenance and repair of the condominiums 10 to 20 years in advance. Please refer to the table below for each main use.
Accumulation based on a "long-term repair plan" that leads to the property of condominiums
To explain in more detail about reserve fund for repair, in order to carry out the necessary repairs (maintenance of outer walls, repairs of common areas, etc.) to maintain the condominium over a long period of time, it is different from the management cost. In accounting, the thing to be saved is called reserve fund for repair.
What is the market price of the reserve fund for repairs?
Actually, how much is the market price to pay for the monthly reserve fund for repair?
According to the 2013 version of the “Condominium Comprehensive Survey” that the Ministry of Land, Infrastructure, Transport and Tourism regularly surveys, the average management cost in 2013 was 10,661 yen per month, and the average amount of reserves for repairs was monthly 17,83 yen. In other words, in addition to the loan repayment amount, you can see that there is an average monthly burden of ¥21,444. By the way, looking at the market price of reserve funds for the 1999 version (1999), the average amount of reserve funds for repairs in 1999 was 7,378 yen. In other words, you can see that the price has risen by more than 30% in the last 15 years.
The reason for the price increase
So why has the price so much increased in 15 years? When repairing condominiums, it is important to perform appropriate repair work in a timely manner in response to deterioration over time of the building. To that end, it is essential to accurately create the aforementioned long-term repair plan and set the amount of reserve for repairs based on it. However, in the past, there was no guideline on how to formulate a long-term repair plan. Therefore, the Ministry of Land, Infrastructure, Transport and Tourism formulated it in 2008. Therefore, the long-term repair plan was reviewed accordingly, and the reserve for repairs was calculated again. In other words, the proper amount of money is being collected.
Repair fund is not the same amount every year
The amount of the reserve fund for repairs is the same every month every year, but that is not the case. It may be worth noting that in some cases it may increase over time. It seems that the longer the building age is, the more likely it is that the reserve fund will increase. When carrying out large-scale repairs, the reserve for repairs is often reviewed as a result of estimating repairs. Large-scale repairs are generally done every 10 to 15 years.
The Ministry of Land, Infrastructure, Transport and Tourism's "Manual on Reconstruction Techniques for Condominiums by Renovation" shows an example of every 12 years, but even in that case, the reserve fund for repairs will be reviewed during large-scale repairs. It may be helpful to refer to it when purchasing.
5 Reasons Why Repair Reserve Funds Go Up
Let's take a closer look at why reserve fund for repair might go up.
The initial set amount is low
The first reason is that the initial amount of reserves for repairs at the time of sale is low. Especially in the case of second-hand condominiums before the creation of the guidelines, it is highly possible that the initial set price is set lower than the appropriate amount, and as a result, the price will rise in the future.
Step-up accumulation method with fixed price increase
The second is when raising the reserve fund for repair price is a fixed collection method. There are two reserve fund reserve methods: the "equal fund reserve method" and the "staged increase fund reserve method." The equal fund method is a method of dividing required repair money by the planning period and paying the same amount every month. Therefore, the reserve fund for repairs will not change during the period. However, many condominiums use the latter method of gradually increasing reserves, and the reserve fund gradually increases in price. It is important to check carefully as you will be informed of the payment at the time of purchase.
Market prices for repairs are rising
The third is when the market for repair costs rises and the reserve fund for repairs rises accordingly. There is a concern that the workforce will decrease due to the aging of the population, and there will be a shortage of labor for construction workers, and such a shortage of labor will lead to soaring labor costs, resulting in higher repair costs.
Implementation of large-scale repairs not originally planned
Fourth, there are large-scale repairs that are not planned. When the building age has passed, the equipment, etc. will become old, so it is necessary to carry out large-scale repairs. Barrier-free construction and upgrade construction are not included in the long-term repair plan, and there is no reserve fund, so owners have no choice but to raise the price.
Fifth, the cost is high because owners left everything to the management company. As a result of these factors, the fund for funded reserves continues to rise.
Timing of price increase
Now that we know the reason for the price increase, we would like to touch on the timing of price increases. The timing of price increase basically depends on which method is used to accumulate. It seems that the timing for raising the price with the equal fund reserve method is often after the completion of large-scale repairs. It can be predicted that the cost was higher than the estimate at the time of planning. In case of staged increase fund reserve method, the timing of price increase comes every few years. It is necessary for owners to be informed of this when you purchase the condominium and schedule it yourself.
When purchasing a condominium, understanding the significance of the reserve fund for repairs and why the price will rise will change the criteria for choosing a condominium. Check whether the amount of the reserve for repairs will increase significantly or moderately, check the age of the building, and prepare in advance.
Please contact us for consultation on purchasing or selling real estate.
Change the wallpaper of the apartment. We will explain the three points to check and the cost.
There may be times when you want to change the wallpaper of an apartment you purchased, when the stains start to stand out or you want to refresh your mood. At that time, do you wonder if "Is it okay to change the wallpaper of the apartment?" As a premise, in the case of a rental property, there is an obligation to restore the original condition, so basically the wallpaper cannot be replaced. In this article, if you want to change the wallpaper of the purchased property, we will tell you the estimated cost of changing the wallpaper and the DIY method.
Three points to check before changing the wallpaper of the apartment
Apply to management association
The Ministry of Land, Infrastructure, Transport and Tourism has established a standard called "standard management rules", and many condominiums throughout Japan have the same or similar standards as the standard management rules. The standard management rules stipulate that "when attempting repairs or remodeling, owner must first apply to the president of the management association and obtain written approval." Actually, it depends on the rules of each condominium, but in most cases, when the resident changes the wallpaper, owner must apply to the management association in advance and obtain approval. You don't have to be overly rigorous, even if you need approval, because it doesn't go through such a rigorous review. If the application is approved, you can freely change the wallpaper within the approved range, so be sure to apply without ignoring the rules.
Know the structure of an apartment
If the condominium structure is reinforced concrete, wallpaper may be attached directly to the concrete surface. In this case, you cannot attach the wallpaper neatly unless you choose a wallpaper that can be attached directly to concrete. In particular, if the wallpaper is laminated and has an antifouling effect, it will be difficult to stick it in a flat state. Choose a wallpaper that suits the structure of your condominium, and be careful not to create a different finish than the image.
Know the type of wallpaper
The wallpaper used in the condominium is mainly divided into two types: mass production cloth and general cloth. We will introduce each feature together with the materials used.
Mass production cloth
Industrial cloth is a mass-produced cloth that often has a simple design, but the advantage is that it is cheap and available. Since the wallpaper is of high quality and has both durability and mildew resistance, it is used in many rental houses and houses for sale. Various manufacturers are producing, but the format has not changed significantly. Instead of having no special personality, it is a wallpaper produced with the concept of suppressing costs and supplying standard wallpapers.
General cloth (1000 series cloth)
General cloth is a cloth sold by wallpaper makers, and it is a wallpaper that mainly uses vinyl cloth such as vinyl chloride resin. Although it is more expensive than mass-produced cloth, it has the advantage that it has abundant colors and designs, so it is easy to prevent stains, and there is also wallpaper that has the function of absorbing moisture. This is a wallpaper that each manufacturer puts effort into producing, and they are renewing and selling a pattern with a volume that is several times the volume of mass production cloth. Therefore, it will be expensive, but you can find unique wallpapers, and you can search from many samples, from calm designs to designs that please children.
Breakdown of costs for changing wallpaper in the apartment
When changing the wallpaper of a condominium, both the material cost of the wallpaper itself and the cost of the construction to attach it will be required. The fee varies depending on the material of the wallpaper, the size of the room, and the details of the construction work, so check the price quotes for each item.
As we mentioned earlier, usually either the mass production cloth or the general cloth is used for the wallpaper of the apartment. It is worth considering that the cost price per 1 sqm is 800 to 1,000 yen for mass production cloth and 1,000 to 1,500 yen for general cloth. Assuming the size of a typical room, let's take a look at the market price of wallpaper material costs.
In the case of a general cloth, there is a difference of about 500 yen per ㎡ between the cheap price and the high price, so the larger the room, the more different the price. Also, if you select a "luxury cloth" that exceeds the performance and design of ordinary cloth, the price will be even higher.
Cost for replacement work
The re-covering work includes construction costs, curing costs, groundwork processing costs, and disposal costs for old wallpaper. Depending on the construction company, the wallpaper fee may include the construction fee, so check in advance whether the construction fee is required separately. When the construction cost is separate, if the above work is enough, the price of the cost is about 20,000 to 50,000 yen. However, if you move a large piece of furniture, such as a piano, or need special curing, you will generally be charged an additional fee.
Is it possible to do a DIY wallpaper replacement?
It's possible to change the wallpaper in DIY, but you'll need to procure the wallpaper yourself, and you'll need to buy glue, a cutter, and a resin roller to make it flat. All of these items are sold as a set, so it's convenient to purchase at a home improvement store or interior shop. DIY costs include the cost of adhesives, in addition to the cost of wallpaper sold at the store. In the case of a room of about 8 tatami mats, if you choose a cheap wallpaper, you will be able to refill from about 20,000 yen to 30,000 yen. It's a good idea to try DIY if it's a small room or make an accent wall, as it can save you money. However, if you don't want to fail in a wide range of construction work, it is safer to ask a construction company that seams will not stand out and there will be no problems with bubbles or deviations.
Even if you purchase a condominium, it is generally not allowed by the rules to change the wallpaper without permission, so be sure to apply to the management association and obtain approval before changing the wallpaper. The market price for refilling varies depending on whether it is a mass production cloth or a general cloth, and if you ask the construction company, the wallpaper fee may include the construction cost.
The wallpaper affects daily life, so it depends on the area to be replaced, but it is safer to ask a reliable construction company than DIY.
Arrows International Realty Corp.