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Initial
project reserves are funds set aside from the permanent financing
to cover possible losses or shortfalls in the cash flow. Before
the project is in operation, developers fund the initial reserves.
Once the project is operating, cash from reserves will be withdrawn
when needed and replaced on an ongoing basis.
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Initial Rent-Up Reserves allow the project to maintain
a positive cash position even though all of the units are not
leased.
- Initial
Operating Reserves protect against any shortfalls in income.
For example, funds from the operating reserve would help the
project continue to operate through a temporary increase in
vacancy.
- Initial
Replacement Reserves
establish a fund for replacement of major building components
that will occur over the life of the project. For example, replacement
reserve funds may fund the replacement of a building's roof
or plumbing system.
- Use
the Other Initial Project Reserves Costs field to enter
costs related to initial reserves that are not represented by
the other items in this category. Enter a label (replacing the
"Other Initial Project Reserves Costs" text) and an
amount. If you do not need to use this field, simply leave it
blank.
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