Recently, someone looking for their first condo in Allston asked me what exactly a reserve fund is and why it's important to check. Given the characteristics of this neighborhood, which has a lot of college students and young renters, there are many inquiries considering rental income. Therefore, it's essential to first understand the hidden management fees and the structure of the reserve fund before proceeding with any purchases.

So, what is the level of management fees in this area? In the Boston area, condo management fees range from $200 to $1,000 per month, with a recent survey showing a median of $386 per month in the Boston area. About 30 percent of condo owners pay more than $500 per month. In neighborhoods like Allston, where many condos are converted from older buildings, management fees may appear lower than those of new constructions, but it's important to consider that costs for replacing aging plumbing or heating systems can come from the reserve fund at any time.

How does Massachusetts define reserve funds? According to Section 10(i) of Chapter 183A of the Massachusetts General Laws, condo associations are required to maintain an adequate replacement reserve fund as part of common expenses. However, this adequate level is not defined by a specific amount, and there is no regulation mandating a reserve study. This means that the determination of how much should be accumulated is left to the judgment of each building's board of directors.

What should you check before signing a contract?

• Whether a recent reserve study has been conducted and the current balance
• Items included in the management fees and the trend of increases over the last five years
• Rules regarding short-term rentals and pets

These three items can be verified by requesting the HOA financial statements and board meeting minutes from the agent reviewing the property. Additionally, mortgage lenders will review the overall delinquency rate of the building, the reserve fund ratio, and any ongoing lawsuits, so buildings that do not meet the criteria may be classified as non-warrantable condos, making loan conditions more stringent.

So, what kind of neighborhood is Allston for investors looking for rental income? Its proximity to the university ensures a steady demand for rentals each semester, which is certainly attractive. However, how each building's rules treat short-term rentals or semester-based rentals varies. Some buildings may even restrict rentals altogether based on ownership duration, so if you plan to generate rental income, be sure to check the rules before signing a contract.

If you are moving to Allston from another state, keep in mind that Massachusetts property taxes and condo management fee structures may differ from where you previously lived. While the property tax rate itself may feel lower than in other states, it is common for management fees to be relatively high due to the prevalence of older buildings in the Boston area. For those who have just immigrated from Korea and are preparing to settle down, it's helpful to understand this dual cost structure, meaning you need to consider both property taxes and management fees to accurately gauge your actual housing costs. Families looking for preferred school districts among the Korean community should note that school district evaluations can vary by neighborhood, so while referencing ratings from GreatSchools or Niche, be aware that school district boundaries change frequently, and it's advisable to verify the exact assigned school for any condo of interest before purchasing.

How can you specifically check the reserve fund when viewing properties? In most cases, you can request the financial statements and budget for the most recent fiscal year from the seller or management office to check the current reserve fund balance and annual contributions. Additionally, asking whether there have been any special assessments in the last five years, if there are any ongoing lawsuits, or if there are any planned major renovations can provide a much more comprehensive understanding of the building's financial health.

In neighborhoods like Allston, where rental demand is steady, it's not always the case that lower management fees indicate a good property. Instead, whether the reserve fund has been consistently built up can be a more critical criterion for judgment. This article does not constitute investment or legal advice, and it is recommended to consult with a professional before finalizing any contracts.