A HOA budget is paramount to the financial success of every community association, and maintenance costs are the biggest share of HOA budgets. Therefore, creating a proper maintenance plan for the year ahead is one of the most important tasks for HOAs. Here are some tips on how to do it properly.
Why is an HOA Budget Important?
A homeowners association budget is a financial plan consisting of the HOA’s estimated revenue and expenses, as well as reserve fund contributions, for a specific period of time (usually a year). The HOA budget is a valuable instrument for any homeowners association. It acts as a guide of sorts, steering the board to make the right financial decisions. A budget also helps you plan for the coming year’s expenses, allowing you to manage the association’s expenditures carefully. This includes maintenance, utility, insurance, and management fees. Additionally, the HOA budget helps the association maintain a reserve fund, which contains the funds necessary for the cost of major replacements and repairs.
How to Develop an Effective Maintenance Budget?
Plan Maintenance Proactively
At every building, things break, stop working, and need replacing from time to time. Fixing emergencies and solving maintenance problems is almost always a lot more expensive than preventing them in the first-place. Therefore, creating a proper maintenance plan and proactively fixing and replacing things before they break and cause a problem will save your HOA money in the long run.
Look at Past Budgets
Reviewing your annual budgets for the previous years and looking at how past projections compared to the actual expenses can help you identify trends. For instance, you may discover that your actual maintenance costs usually end up being higher than your projections. This is a sign that your HOA has been under-budgeting for maintenance in the past and can help you make more informed decisions in the future.
Prioritize Your Repair and Replacement Projects
The more repairs and replacements are ignored, the less happy your residents will be. Further, they can cause bigger problems, safety hazards, and even decrease property values. Therefore, repairs and replacements must always be handled properly. One thing to keep in mind is that they can never be taken care of all at once. This is why prioritizing them from emergencies to high-priority, and low-priority maintenance jobs is crucial. See our former article for help.
Send Requests for Proposals
Generally, HOA budget plans involve many projections, but it’s useful to get accurate numbers whenever you can. Take a look at your current vendor contracts and see which ones are up for renewal. Then, send out requests for proposals to see how much vendors intend to charge you for their services. This will help your HOA create a more accurate budget plan.
Be Prepared for Changes Outside Your Control
Even the best plans can be overwritten by life and there will always be something that may go wrong. There are forces outside your control, such as inflation, changes in wages, or residents not paying their dues. If you plan and prepare for unexpected changes, your HOA will be less surprised and set back by any emerging problems and will be able to better handle them.
Creating a budget is a complex task and without much experience, it can seem quite daunting. This is where cooperating with a property management company can be really helpful as they can provide you with expert market tips and help you HOA create an effective budget. If your HOA needs help with creating a budget and you’d like to work with us, request a proposal today.