Newsflash: Buying Condo in DC, Need Help Deciphering the Balance Sheet Disclosure

So we are excited to have found an affordable condo in DC in a 12 unit building, but we suspect there might be a reason for the low price relative to the market: $380,000, $500 HOA fee (includes taxes). The building is 100 years old, but pretty well maintained from the look of it. The meager balance sheet states the following:AssetsCash Operating: $1,700Cash Reserves: $11,700Total: $13,400Liabilities & Equity:Accrued Expenses: $3,950Prepaid Assessment: $350Total Liabilities: $4,400CapitalRetained Earnings: ($40,000)Total Capital: ($40,000)Reserve FundsBeginning Balance (Jan 1): $50,000Reserve Contributions: $6,000Total Reserve Funds: $56,000Net Income Gain/Loss: ($7,000)Total Liabilities & Equity: $13,400So the first thing that jumps out to me is the low reserves. We don’t have any other information or a reserve study on the building. Second concern is the negative retained earnings and seems weird compared to the “beginning balance” – does that mean there was a large expense since January? It could mean that they operate at a loss, but I’m financially illiterate so I don’t know. They operated at a loss last year.Any thoughts on this? The HOA says they are not expecting any special assessments in the future, but they always say that, don’t they? Hmm.



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