Cash Flow Analysis for the proposed New RRA Office

By Tom Sopko

As you probably already know, the Office at Route 6, is over 100 years old and now unusable. The Association is currently renting Office space in Rock Creek while investigating the options for a permanent Office location. At the December 10, 2015 meeting at the Clubhouse, the Association Manager and the Board reviewed the RRA Office options. There were two suggested proposals from the audience. These proposals were to look at (1) a cash flow analysis of Buy versus Rent; and (2) to consider a mail out/mail return survey. The survey is under consideration. The cash flow analysis has been done and a summary is shown below for Buy versus Rent.

1. Buying an Office is $70,000 cheaper than is renting after 20 years. Twenty years is the maximum length of the commercial mortgage period offered by lending institutions.
2. Buying an Office is $400,000 cheaper than is renting after 50 years. Fifty years is about how long we used the Office at Route 6.
3. Our current rental cost of office space in Rock Creek is $12,000 per year. The breakeven to buy versus rent, meaning the approximate same cost, would allow for a commercial mortgage of $40,000 per year. This is twice the amount the Board plans to borrow.
4. The cost of buying an Office is clearly less expensive to the Membership than is renting an Office.

As of January 21, 2016, there has been no Board decision on the location of the new permanent Office.

The complete analysis with the base case and approximate breakeven points can be found here.