What Is a Co-op Post-Closing Cash Flow Statement in NYC? www.hauseit.com/co-op-post-closing-cash-flow-statement-nyc
Save Money When Buying in NYC: https://www.hauseit.com/hauseit-buyer-closing-credit-nyc/
If you’re buying a co-op in NYC and preparing a board application, you may be asked to submit a post-closing cash flow statement alongside your financial statement. The post-close statement of cash flows is actually rather simple and nothing to be concerned about.
Truth be told, it’s quite rare for a co-op to request a post-close statement of cash flows as part of the board application. If they do request one, simply download one of our templates below and follow the instructions in this article for completing it!
What Is a Co-op Post-Closing Statement of Cash Flows?
A post-closing statement of cash flows is designed to show the co-op how resilient your financials are in the first year or two after you close on your apartment. The basis for this request is an extension of the co-ops standard assessment of your post-closing liquidity.
In short, a co-op wants to make sure that you can have sufficient cash reserves which will allow you to continue paying the monthly maintenance bill for some time even if you suffer a job loss or other transient dip in income.
The post-closing cash flow statement itself shows your starting cash balance each month and computes an ending monthly cash balance by adding your income and deducting your living expenses. The starting cash balance for the next month is simply the ending cash balance from the month prior.
Since most co-ops have a debt-to-income target for applicants of 25% to 30%, this means that by default you should build net worth each month because your fixed housing expenses are a small fraction of your total income. Therefore, a post-closing statement of cash flows should always show your cash balance to be increasing over time.
Because the cash flow statement should always show a net worth gain over time, one could make the argument that it’s a superfluous request. The truth is that co-ops may request it in order to test you and see what sorts of living expenses you have and may reveal to them.
The entire co-op board approval process in NYC is as much a test of your ability to follow instructions and keep your head down as it is an evaluation of your overall financial qualifications.
What Income Should Be Included on the Cash Flow Statement?
You should list all recurring income on the post-closing cash flow statement. These income sources may include salary, bonus/overtime, dividend and interest income, royalty income and rental property income.
If you occasionally receive supplemental or side income, it’s best not to include this since it’s not recurring and impossible to precisely predict (as is the case with recurring income).
