5 Budget Questions To Avoid HOA Due Increases
Live in a HOA community where budgets are planned too tight? It happens more than you think. Whether you’re a property manager or homeowner in a HOA community, there are specific budget questions that everyone in the community should ask. Discussing money regarding a community budget isn’t always easy. Too many opinions and lots of time trying to get everyone on the same page is tough. This is why it’s important to review your budgets and ask the right questions to avoid future HOA due increases.
Does Your Community Have Reserves?
Every HOA budget has a reserves account. A reserves account is essentially the HOA’s savings account. Money is allocated to this account for the HOA to use if over initial budget or as an emergency fund. Too often, many communities aren’t aware that they have the account which makes it easy for money to be mismanaged or never used within an appropriate amount of time. This account is critical for unexpected situations. There may be a natural disaster or something that needs to be up-to-code that wasn’t initially planned. Know about this account and the intent of spending.
Are Price Increases Included Into The Budget?
This is a question that should be asked if budgets are being finalized. Every year property managers begin prepping for annual budgets earlier than other years. This is due to inconsistent pricing for many services and products. The unpredictable economy and increases in labor wages and materials are not helping either. Most companies know if their price increases will happen the following year. Your property managers should be reaching out to all suppliers or vendors regarding price increases for an accurate budget.
Does Your Community Have A Checklist?
Many HOA communities don’t have checklists, which isn’t uncommon. This is why it’s important to ask if a check list exists so that board members can understand what is included for specific line items on their budget. It’s also a great educational tool because not all board members are available for every meeting. Using a checklist with due dates helps keep community maintenance and tasks on time and within budget.
What Are Future Project Plans?
Every HOA community has a plan for improvements and they can take up a healthy portion of money if left for the Reserves every year. Understanding cost, scale, and time of HOA community projects is critical for budget planning. It also helps plan for future costs and potential HOA due increase due to inflation to help cover costs so that you aren’t dipping into reserves as often. Lastly, always ask for long term plans which could reach up to 4 years. This could mean that a clubhouse needs expanded, offices need to be added for onsite property managers, etc….
Is There Room For Delinquency?
Not everyone pays their dues on time. This can provide cash flow issues to pay for projects that need done and routine maintenance staff that may be onsite. Always review your HOA community guidelines regarding payments. If the budget is too lean, there will not be enough money to maintain the community. This leads to expensive repairs and potential increase in dues to catch up. Also, keep in mind that if you decide to sell your home, most communities require homeowners to pay any outstanding dues. These outstanding dues can prevent you from selling your home right away. Know the details and make sure that your HOA allows for delinquency.
Everyone wants to avoid due increases which is why asking the right questions is important. As a homeowner in a HOA community, it is important to understand how your money is spent. You are financially contributing to services for the greater good of the community. Knowing where the money is being spent is just being a responsible homeowner. As a property manager, you owe your community the accurate financial information so that proper decisions can be made for the good of the community. This is one of many reasons why you are there to support the community.
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