Florida Senator Jason Pizzo talks about the value of investing.

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Sen. Jason Pizzo: There’s a gentleman right here in the front row, his name is Louis Orloff from St. Pete? Tampa? Where are you from?
Louis Orloff: St. Pete.
Sen. Jason Pizzo: From St. Pete who came to me a couple years ago with an idea that I think is not a terrible one. And immediately I remember I reached out to Enid to talk to her husband Steve, I wanted to sort of broach the topic and talk about it and some other people and it’s the following: these reserve accounts don’t earn any interest, they don’t get any kind of return. And we’re talking about 634 units and you’re putting that kind of money away for a long period of time, you know, and there’s absolutely no return, that’s why people are… really reluctant. They lose the opportunity cost of those dollars. It’s kind of like when you got a mortgage—your first mortgage at least—and the bank requires you to escrow property taxes and you’re like, “I’m fronting all of this money, they’re getting the float, right, and then they get to hold that money and then they pay… when they want it, but I’m losing the ability to use that money.” Reserves kind of have, a lot of people have that same mentality: “I’m just throwing money into a kitty, I might not be… living here in five years. Right?” That also exacerbat[es] that kind of issue.

So Mr. Orloff came up with an idea that I actually proposed and filed a bill and people were like that’s not a bad idea. That, with proper planning, [a] certified financial advisor, the appropriate… double, triple checks, to allow associations to actually invest the reserves. Nothing aggressive, but just something maybe like that a teacher’s pension plan would be invested in to earn some kind of maybe even low single-digit, you know, high single-digit return. It’s like rule of 72 over a serious number of years—by the time you get to a 10-, 12-, 13-year schedule you may have doubled the principal amount of the reserves in the account without actually putting anything in. And you know that’s one kind of instrument or idea of lessening, you know, what everyone’s considering to be doom and gloom and the apocalypse coming.

Florida Representative Daniel Perez talks about structured reserve funds.

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Rep. Daniel Perez: …first constructed the time period for a reserve fund to be funded on the structural integrity components was a year, and we understood the potential financial burden that that would have, and so through conversations and negotiations, we have extended that to three years. And so we have given these associations three years to get the necessary funds for those specific components. So it’s not for the flower bed or for the gate or for the security guard—it’s for those specific components, we’ve given three years in order for those funds to be recuperated. And so that was kind of our happy medium.

Florida Senator Jennifer Bradley talks about the difference between Reserves and Structure Integrity Reserves

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Sen. Jason Pizzo: A couple of other questions, before I go to Senator Bradley, all related to board director’s mis-management issues, meetings, elections concerns. That will absolutely be tackled and addressed in the incoming session, as well, as it relates to more efficient, comprehensive reporting of issues and getting more timely responses. When you come upon some of these issues or problems that are happening, it’s usually a 48-hour/72-hour sensitive window about an election or some sort of mis-management or concern about that, and then having to wait 2 month or 3 months for a reponse is obviously not helpful whatsoever. Senator Bradley, do you want to take the next one?
Sen. Jennifer Bradley: Sure. The next question is: “Is there a distinction between structural integrity funds and reserve studies in the statute.” And that is a critical distinction that is new for folks who have been in the condo world with this bill. You have your traditional reserve studies, budget planning tools that allow condos and associations to plan their financial health, and they are recommended by professionals, they should be done. Some do them every year, every 3 years, hopefully every 5 years. I mean those are the reserve studies that most people are familiar with. What this bill did through the work of Representative Perez was to create a new type of reserve study called the structural integrity reserve study, and what that part of the bill requires is that once every 10 years, so we’re hoping that you’ll continue to do your regular reserve studies, but every 10 years it needs to be of this particular type. And that will require that it’s not just a reserve study company coming… it requires the input of a professional—of an architect or an engineer to be a part of that study. To look at enumerated, I think there are 10 or 11 enumerated, areas of the structure, and step through and make sure that there is an estimated useful life and that there are funds there so that when that item and when that part of the building needs to be replaced, that the funds are there to do that. So there’s regular reserve studies and also these structural integrity reserve studies. Very different.

Louis Orloff on “Condominium reserve funds – a 3 legged stool”

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Louis Orloff: Everyone knows there is a balance between reserve funds, the quality of your property, and its value. It’s a three-legged stool. One weak leg and there’s a problem.
Hello, I am Louis Orloff the managing director of Reserve Fund Advisors. We specialize in helping associations manage your reserve funds for the best possible future.
To begin with, living in an association community is a pay-as-you go lifestyle. In a house, you pay for everything, when you want to, and as you want. In an association everything on the outside of your unit is managed by the board. And the board relies, in part, on something called a reserve study. And, you know, we hope the people they hired for the reserves study, you know, hire the kind of people who are experts. They understand Florida and its harshness. No ice damage for us. The reserve study gives a schedule of required future maintenance and estimated costs. Then the board, using that information, creates a budget. And at the annual meeting, they tell you about the budget and how much in monthly fees or assessments you’re gonna owe every month. Today, we will be looking for a solution through careful investing to reduce or eliminate continually rising assessments and fees.
What are we doing to invest the money that’s sitting in the reserves now? And I thought about it. And I thought, you know, you think about investing money? And the first problem I thought about is, Uncle Vinnie’s race horse, or huge drops in the market. Unless we all want to just be ready for the bill and in the year where we spend a million three, we all just get together here and toss into a hat our proportional share and in any year that it’s a zero we just throw a big party and have a good time. Well, that’s not really the way it works. We’re putting in a level amount every month. We have a mismatch. We have these variable, highly variable expenditures, plus the variability of any emergencies. The result of this all, like it or not, is a pool of assets. And the reality is that pool of assets, it’s either adequate, more than adequate, or inadequate when making the bill.
So I started thinking, let me take you to number two now. What would be the solutions that could make it more adequate most of the time? I think about the various Pension Funds, and there are teachers and state and county employees that work their entire lives and do exactly this… squirrel away money every single paycheck. Let’s face it, this is the money these people need to eat, pay rent and life expenses and professionals invest this money seriously, and they seem to do really well. And this is a broadly accepted way to make this money happen in the future, and for associations there’s a way to do it.
The reserve study breaks out costs and allocates them into what’s got to be spent soon and what’s got to be spent later and what’s gotta to be spent much later. And I chose the most conservative way, which keeps everything we’re projected to spend in the next three years in a cash or cash equivalent position. We fully fund the next three years. I have no idea what the pension plans are going to do for the next 30 years. We can Follow their lead with reserve funds. I know they’re professionals. I know they have rules. I know they’re fiduciaries. I know they’re good at it. And this is not a full out invest all of the money, we have a three-year cushion. And the long-term money is invested for the long-term. This is really keeping good reserves. And this is an illustration of how you fund the future. What I’m talking to you about is the future and having a better one.
Please watch my video on LTIM (Long-Term Investing Method) at
Thank you

Louis Orloff on Investment Policy Statements for condominium boards.

See the document he mentions in the video here.

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Louis Orloff: Everybody knows the board invests your condo funds somewhere. Some people think banks are good, others aren’t sure they trust the board’s decisions, and other people want to know how the decisions are made. You? You can find your own reasons why how your fees are invested is important.
What I am going to talk about today is something called an IPS, investment policy statement.
Having enough cash to maintain the value of your property is important. But do you think it is prudent to keep it all in the bank? Even the money needed in 15 years to replace the pool deck and other long-term maintenance items?
I am Louis Orloff, managing partner of Reserve Fund Advisors. We specialize in helping associations invest their funds for a better future.
What does an IPS say? Let me read one of the opening sections and this will be fast. “The overall investment objective of the organization is to maximize the return on invested assets while minimizing risk and expenses.” That seems pretty straightforward. Your board has a fiduciary duty to you. This means they are to act in your best interests. Keeping all the funds in a bank earning less than 1%, and with inflation at 9%, well, they are losing 8%of your money! And how much do your fees go up each year? Oh, 7%-8%.
Some of the by-laws and documents may need to be changed to include the IPS. Since they can be changed by a vote of the owners, these documents are not an obstacle. They do not need to the reason to keep losing money to inflation.
Let’s look at how a charitable organization like the Community Foundation invests charitable funds entrusted to them by donors. Well, and you can look this up, over the last three years they have averaged over 11%! And since they started years ago the average is over 9.5%! How do they do this? They invest for the long term and maintain cash accounts for short term needs. They invest like any other long-term institutional investor. And they hired registered investment advisers governed by their investment policy statement. The trustees of the foundation do not make investment decisions, they make the guidelines.
Let’s start with the best practices for your association board to follow. Here goes: first thing they do is they create an investment policy statement. It should have, in my opinion, a clear statement of the organization’s investment objectives. You know, your board hires a management company, a lawyer, and accountant, even a landscaper and plumber. Each an expert in their skills. The IPS will give the board a structure on hiring a registered investment advisor. The RIA will not be related to any owner management company, or anyone involved with the association.
The board will now have professional investment advice. They fulfill their duty to you by examining all investment options. The RIA will likely recommend a long-term strategy for funds not needed right away and a cash position for the short-term. As a condo owner and an RIA, the IPS, in my opinion, should require three years of projected future maintenance to be held in cash in the bank. I want to make sure that roof can get fixed when it needs to get fixed! You may not know that the State Board audits RIAs regularly to make sure they’re following the laws and doing everything by the book. Your funds must be held by a third-party custodian. The RIA does not hold your money.
Board members do not choose the investments, they have an independent professional, you have a professional. And at the end of the process, at the end of their day, the Board may continue investing funds in the checking account, but they will have fulfilled their fiduciary duty to you by examining the choices.
If you would like to see the Community Foundation IPS you can go to their website, I highly recommend that you download the draft at (click here to see the draft).
Thank you.

Louis Orloff on condominium budgeting approach.

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Louis Orloff: Everybody knows budgeting is important even if they find it hard to do. Some people think budgeting is for rainy days and others look at budgeting for things that are known to be needed — like the envelopes in the kitchen drawer. And other people want to know how much, when, and even the why. You can find your own reasons why budgeting is important.
What I am going to show you today is what budgeting means if you live in a condominium association. We will cover the budgeting process in more detail in this video. I am Louis Orloff, Managing partner of Reserve Fund Advisers. We specialize in helping associations invest your funds for a better future.
Do you know the budgeting process for your association? There are many things to know. First, an association budget consists of three buckets of funds. Number one, there is something called the operating fund. Number two, there is a second called the reserve fund budget. Number three, if you live in Florida, soon there will be a third called the structural integrity reserve fund. We’re going to talk about the third fund in a later video.
How does this breakdown between operating expenses and reserve funds work? Assuming for a moment that your association properly reserves funds for future replacement and maintenance of the property, approximately 30% to 40% of your total monthly fee goes into the reserve fund leaving the balance going to pay operating expenses. Operating expenses take care of the electricity for the common areas, keeping the pool clean, landscaping and things like that. Items that the owners use all the time, that wear out over time…like driveways, roofs, and balconies are covered by the reserve funds.
Well maybe you are a condo owner who just received notice from the association that your monthly fees are going up by an additional $100 per month. Well, you know when you bought your condo and elected a board of directors, you did not give them a blank check made out on your bank account to just spend money anywhere they want. Every year they develop a budget and sometimes in the middle of the year they may add items to the budget. All of these discussions take place during the board meetings and you as an owner are allowed to go to those meetings and you should. The reality is all of us care about our money and how it is spent and you can participate by asking questions.
Some of the questions might be seemingly obvious. If you’re own electric bill has been going up a little bit every month, let’s say 2%, and if the condominium common area electric charges are going up much more than 2%, well all our electricity comes from the same place and we all pay the same amount per kilowatt so what’s going on? Well maybe you replaced your bulbs with LEDs or installed switches that automatically turn off lights after you leave the laundry room. Utility expenses are an example of the types of questions that are fair game at a board meeting.
So I’m not suggesting that you become an accountant or bookkeeper or a budgeting expert. I’m just suggesting that we use common sense, and ask simple common sense questions and make sure that the board knows that somebody is just watching over their decisions. If you owned a house you wouldn’t let your neighbors decide how to spend your money on your pool, your flowers, or a fence. You own a piece of the condo property and you have every right to ask.
And we’ll wrap this up for the moment to just say that boards have a fiduciary duty to you and to the association and are required to act as a prudent person. In short what this means is that the board is supposed to spend the association money the way that the owners of the association would spend their own money, not the way that the board members want to spend the money.
And we’ll talk more about fiduciary duty and prudent person issues in another video. But you are the homeowner and your opinion matters. You hold the power of informing a sound budgeting process and proper investment decisions. The board works for you and your fellow homeowners. Your association funds can be working harder for you as a homeowner by making sure that the board has a clear investing strategy as part of the budget.
For more information you can listen to our next video and feel free to visit our website at Thank you.

Louis Orloff on LTIM (Long-term Investing Methodology) for condominium associations.

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Louis Orloff: Everyone wants an investment strategy when it comes time to grow their money. Some people think of keeping their money in their mattress as an investment strategy. Others look at investment strategies and find them confusing. And other people look at investment strategies to secure their future. You can find your own reasons why investing is important.
What I am going to show you today is how your condominium association can invest like any other institutional investor for the long term. I am Louis Orloff, Managing partner of Reserve Fund Advisers. We specialize in helping associations invest your funds for a better future.
Many condominium associations boards keep association funds invested in bank accounts at returns of less than 1%. Some are a little bit more aggressive and use CDs and are earning between 2 and 4%. With inflation running at around 9% this means that your association is losing in the best case 5% of your reserve funds as time goes along. And every year your association fees are probably going up between 5% and 7%. This means that you are paying the price for your board to not consider investing the same way that any long-term institutional investor would invest.
You know there are state, county, and other workers who squirrel away a little money out of their paychecks to be saved and managed for a secure future using the retirement system. These employees are expecting that when they retire their money will be there for them to pay their living expenses and for other things. They don’t wanna be surprised by finding out that there’s not quite enough money there due to poor financial planning and mis-management. And you don’t wanna find out that there’s not enough money in the reserves to replace the roof, the driveway, the swimming pool, or any other of the common area maintenance items covered by reserves. I put a lot of thought into how condominium associations could invest the same way any long-term institutional investing is done.
So I started thinking about this and I thought there’s a way to do it. And I thought about ice cube trays as an example. You know there’s really two ways to fill an ice cube tray. One is to hold the tray underneath the water and move it side to side filling up all of the cube spaces and the other way is to hold it at an angle and let the water go in at the top and slowly fill in at the bottom and it is this image to keep in mind. I call it the LTIM strategy Long Term Investing Method. The money coming in from fees every month fill in the top 3 years with 100% cash for the next three year’s projected needs, and future year’s funds are invested starting right below the cash line, getting less and less risky as time goes along until they become cash. This is not investing all of the money in the market. You always have three years of projected expenditures sitting in the bank.
We will talk more about reserve studies in another video but for today this is the document that tells the board when everything needs to be replaced and approximately what it will cost. You are entitled to see a copy for yourself. And we will talk about reserve funds and why you have an obligation when living in an association to pay as you go. If you are a board member or a condominium homeowner, and if the answer to the LTIM method is “our documents don’t allow for us to invest outside of a bank.” Well, all documents can be changed by a simple vote of the owners of the condominiums. Your board has a legal duty to act prudently in your best interests.
In my next video I’m going to show you a case study of an actual condominium association in St. Petersburg, FL. You will see that they would have approximately $8.9 million in the bank, projected, as compared to $1.3 million. Your association funds can be working harder for you as a homeowner. Tell your board.
For more information go to and download our free guide about prudent investing for association reserve funds.
Thank you.

Louis Orloff on condominium reserve funds and property values.

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Louis Orloff: Everybody who owns a home would like to know in advance if the roof is going to leak. Some people think things are in good shape for now, and others sit back and wait for the leak, and others try to save money for the inevitable. You can find your own reasons for wanting to know the future costs. 

In this video I am going to focus on reserve studies and how they help your association to maintain the value of your property. I am Louis Orloff managing director of Reserve Fund Advisers and we specialize in helping condominium associations invest your funds for a better future.

You know, when you bought your house in the final negotiation you might have gotten a home inspection report.  This report told you of potential future expenses as well as things that had not been properly maintained.  I imagine you used this information to negotiate a better price, or maybe you just walked away. A condominium reserve study is very similar to the inspection report  when you were buying your house. The reserve study lists everything in the property that will be wearing out as people use the property as times go along. And in the report, there will also be estimates of when work needs to be done and approximately how much that work will cost. Associations that are financially savvy are collecting a few dollars from you every month in your fees to help pay for that future maintenance. All of these things improve the value of your condominium.

Back to the example of buying a house. The inspection report told you how much money you would probably have to spend to repair the house and in how long. It told you things like “the roof will need to be replaced in five years,” and “the estimated life of the roof is twenty years.” So doing this simple math, 3/4 of the roof was used by the seller. Perhaps, had the seller told you that they’d been saving money every month to replace the roof and they had just gotten a quote and let’s just say that they offered you that money or that amount of a discount on the property, well now they have paid for the roof that they used up. And you bought a new home at the correct value. This is how maintaining reserve funds at your association improves the value of your property. Condominiums and associations that plan well for the future, that hold adequate reserve funds, and perform the required maintenance projects command a higher price than those associations who do not properly financially manage the property.

When you go to your annual meeting the board presents a budget. That budget includes projected funds needed for reserves and future maintenance. If your board suggests that you wave saving any money by reducing reserves, think about the value of your property and what you might be giving up in the future.

We’ll talk more about your board’s fiduciary duty and responsibilities to you to act as a prudent person when it comes to how they manage your money, but in short you are entrusting your board to make good decisions that are in your best interest and that are the kind of decisions you would make for yourself.

For more information you can listen to our next video or go to our website at and download our informational booklet.

Thank you.