One thing to pay attention to is the size of the housing company. If it is very small, it may not be a good idea to buy its shares. Were the size of the housing company be cut in half, administration costs would not follow suit. For instance, rooftop renovations and plowing snow costs approximately the same regardless of whether the building has two or twelve floors. Also, charges for common expenses may be reduced with good property management, by use of company assets, and even by having business premises by way of rental income or by charging their shareholders higher charges for common expenses, a very likely scenario. This you may find out by familiarizing yourself with the articles of association. However, smaller charges for common expenses may not always provide a shortcut to success: they may also be a sign of a poorly managed housing company.
Ask the property manager for information regarding shareholder payments and their accounting. For instance, if capital expenditure charges are entered as income, they are tax-deductible for the shareholder. You should also try to find out what other shareholders and the property manager think of this accounting method. More information on entering as income and as funding is available here.
In a well maintained housing company, repairs are systematically thought out. In addition to the required report on maintenance needs, there may also exist a long-term building management plan (known in Finland as ’PTS’). However, note that there are several kinds of reports and plans. A detailed report created by experts is always better than a few seemingly random proposals. Also, pay attention to the financial statement and the related budget and the calculated charges for common expenses.
Be aware of the repair history in the housing company. Make an assessment on the expenditure of upcoming renovations. By using a simplified calculation, have a reserve of 500 to 900 euros per square meter (depending on the age of the building). For a more detailed assessment, you need to look at the housing company documents for upcoming renovations and the price ranges for various types of repairs. However, remember that an empty report on maintenance needs does not mean that no major renovations are in sight. You must allow for renovations in your rental profit calculations. More information on preparing for renovations is available here.