A homeowners association (HOA) can greatly influence how its residents live in homes, townhouses, condos, or other types of communities. HOAs adopt and enforce rules and bylaws for residents who pay fees to be part of the association. These fees cover landscaping, parking, garbage pickup, and other services shared by a community. Here are a few HOA budget best practices for association managers.
1. Designate a Task Force
One of the top HOA budget best practices is to assemble a team that prepares an HOA budget. The team doesn't need to consist of just board members, but it should include the board president, treasurer, and community manager. A sharp focus on the budget by devoted team members points the operation toward financial success.
2. Establish Clear Budget Objectives
Developing a budget involves looking at past, present, and future financial plans. If the association has been around for a while, through experience, its members should understand the difference between needs and wants. When planning the budget, it's helpful to know the association's community plans for the next three to five years. Establishing clear goals for the future will give your budget a more defined structure.
During budget planning, include major expenses like weekly landscaping and pool maintenance. You should also add funds to cover longer-term expenditures like annual tree trimming and pool deck resurfacing with professionally installed safety deck systems. Landscaping should be essential for maintaining aesthetic value, affecting overall property values.
3. Assess Your Current Financial State
Analyze your association's records for the past few years to write a brief summary of the association's financial condition. Comparing last year's budget with actual costs will help determine where increases or decreases might be warranted. You should also know the balance sheet basics, such as net income and debt.
4. Prioritize Repair and Renovation Projects
To improve your HOA, it's crucial to stay on top of the repair and renovation work needed for the community. Repair work should be prioritized for shared community assets to ensure safety and functionality. The obvious wear and tear of structures should be addressed swiftly to maintain community standards that affect property values, and projects should be prioritized based on urgency.
5. Build a Reserve Fund
Building a reserve fund helps keep your overall budget in order and provides more clarity on funding. Each repair or renovation project deserves individual attention, as it's best to take care of one problem at a time instead of all at once. Since you can anticipate various future projects based on member feedback, building a reserve fund will help you pay for unexpected emergencies without surprise assessments to homeowners. A portion of membership dues should go to the reserve fund to cover future repairs and renovations.
HOAs provide plenty of conveniences to their communities, but only after successful budget planning. Following these practices will help keep your budget in order and, potentially, reduce your expenses.