The Depreciation Report:
A depreciation report provides important insights for buyers looking to buy into a strata corporation. It not only speaks about the current condition of the physical components (as long as the report is recent), but also the financial state of the strata corporation. Some of the most important information in a depreciation report can be found in the following two sections:
• The evaluation of the strata’s physical components
• The financial analysis and forecasting
Omitted Components:
One issue we often come across when reviewing depreciation reports is omitted components. Oftentimes this is due to the strata council directing the author of the report to omit certain items, which is a significant concern because excluding some items from the report leads to an underreporting of future capital expenses.
In simple terms, by excluding some items from the report, it appears as though the strata will have less to spend on future capital projects, than in reality. If not caught, this practice can be extremely misleading to potential buyers.
If you want to learn more about what to look for in depreciation reports, you can checkout this article titled “The Problem with Depreciation Reports”, written by Condo Clear’s founder and Managing Broker, Ryan Stenquist.
Source: Condo Clear Services