Investing in the well being of our communities is the core of the HOA Management efforts. Having an association that properly organizes and balances finances is key to maintaining a well-kept, elegant community. Dedication to a balanced budget will not only benefit current residents, but perhaps more importantly, will reflect on the future value of the properties.
Knowing exactly how much is coming in versus the quantity being expensed will eliminate surprises. Having a more practical initiative with regards to the needed expenses for the community in the upcoming year will conjure a more realistic approach to future expenditures. For example: a community may want to be a bit frugal budgeting for social expenses and more focused on (newer) projects such as reserve studies, or setting up a percentage of funds to allocate into reserve accounts (money market, 12 mo. CD’s, or a reputable investment firms on a monthly basis. Also, have a goal of keeping the percentage of uncollected dues at a minimum of 3% and a maximum 10%.
Taking a “nip it in the bud” approach to maintenance or other issues will ensure that they don’t reappear. Newer communities often make the mistake of not keeping a reserve study; due to the false sense of security that comes with having most things being “new”. Obtaining a reserve study from an experienced firm may seem daunting, but will give those overseeing the maintenance of the property a better idea of what major expenses to expect, and an educated estimate of when these expenses will occur. With this knowledge, the Homeowner's Association can create a more effective budget, which also helps determine an appropriate amount of dues to charge each homeowner monthly to put towards reserves savings.
When budgeting for coming months, make sure to take into account how situations may change, whether they are positive or negative. Keeping in mind the fluctuation in maintenance costs as well as utility usage (water/electric/irrigation) throughout the year will also eliminate surprises. Summer brings on the costly maintenance of pools and playgrounds, while winter may bring a surge in fitness facility usage, which could require updating and servicing of machinery.
Understanding the difference between priorities and discretionary expenditures can be a tricky and confusing concept, but producing a budget with both in mind will be extremely helpful. Though Christmas decorations and pool parties are essential to the superior quality of living and aesthetics we so strongly encourage our communities to uphold, they should never take main priority in budgeting.
The core concept is simple: Keep long-term revenues in mind, while updating operational costs honestly. A solid budget will act as a domino effect and strengthen all aspects of your community.
