HOA Budget Tips

HOA Budget
Before purchasing a condominium, most potential buyers take a good look at the Home Owners’ Association (HOA) dues. Not only can high HOA dues be a deterrent to buying a piece of property, but it can also be a hindrance to finding a buyer when you decide to sell. As an owner, you can get involved in the HOA budget process and have a positive impact on dues in a variety of ways.

 

Get Involved

Get a copy of the HOA budget and go over it carefully, noting any questions you may have for the president or the board. Even better, get on the HOA board yourself; you’ll have a lot more opportunity and power to get involved in the financial process, from contracts with the property management company to groundskeepers’ fees and insurance premiums.

Review the Contracts

Every HOA has agreements and contracts with a variety of entities, including landscapers, property management companies and general repair contractors. Review the contracts with an eye to ferreting out where money is wasted, whether contracts can be renegotiated or if it would be the right time to send some maintenance out for bid. For example, you may be able to find a landscaper for a lower price or even keep the same company and reduce frequency of services as long as aesthetics are not put at risk. Insurance premiums are another big HOA expense, and it’s wise to get quotes from other companies or renegotiate with a current carrier when the policy renews.

 

Understand Each Item

When you go through the HOA budget, look at each item individually and see what was actually spent over a three-year period on each item and when any projected increase for the next year may be. For example, you can call utility companies and see if any rate increases are in the works. Whenever possible, it’s a good idea to have a budget that will cover normal repair and replacement of components like painting, paving and roofs. A good long-range funding plan will allow these projects to be conducted from the regular budget without using the reserves.

 

Check Out the Reserves

All HOAs keep reserve funds to take care of unexpected expenses, and these funds may accumulate for years to a very healthy level. If your HOA’s reserves are robust and no major repairs are upcoming, it may be a good time to suggest to the board that the HOA dues be temporarily lowered, reducing the amount put in the reserves.

 

Ask About Deferring Non-Essential Projects

HOA dues are not your only potential condominium-related expense. Often, owners are hit with assessments for major projects like window replacement or roof repairs. Talk to the HOA about the possibility of putting off non-essential projects or repairs for a year or two. Many cosmetic repairs like painting and carpeting replacement can be safely put off, while structural issues need to be addressed.The best way to make sure your HOA dues are reasonable and under good control is to join the HOA board and get actively involved in the budget-making process.