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HOA Management Budget: The Importance of a Cost/Benefit Analysis

Establishing and maintaining a HOA budget can be a delicate process. It’s a key component of board member responsibilities and comes with its fair share of challenges. While no one wants monthly dues to go up, inflation, maintaining property values, and other economic factors affect this decision. And sometimes, refraining from raising dues can actually backfire by forcing special assessments for critical projects. Fortunately, with the help of your HOA management team, you can analyze costs and benefits to create a responsible budget that works for all.

Protecting Property Values and Justifying Costs

Planning a budget first requires asking what contributes to property values, and how allocation of funds will enhance or maintain these benefits. This includes everything from landscaping to amenities and street maintenance to home exteriors. In essence, it’s important to evaluate the features that make the community an enjoyable place to live. And, as a board member, you know your property best and can determine which aspects require budget allocations to preserve property values.

Once these items are prioritized, then the discussion of cost can truly begin. Approaching the budget through the justification of what parts of the community need updates (and to what extent) will drive allocation of costs rather than vice-versa.

Establishing a Budget Timeline

After the list of benefits of costs have been established, it’s important to evaluate each item line by line. An annual HOA management budget should be prepared 90 days ahead of when it’s due for the fiscal year. This allows enough time to have a conversation with the community manager and/or accounting team to evaluate what’s been proposed.

It also prevents cutting corners that can end up being costly in the future or levy the need for a special assessment due to a financial shortfall. Additionally, a thorough evaluation presents the opportunity to review vendors, remove unused amenities or features, and identify areas that match what the community needs and will value most.

Managing Monthly Dues While Maintaining High Service Levels

Aligning dues with current and expected costs of maintaining property values will clearly illustrate how the board is keeping the members best interest in mind, where dues are being allocated, and the justification associated with costs. On the surface, not raising dues may seem like the favorable solution, but it doesn’t prepare the association for challenges lie ahead. In the short-term, homeowners may temporarily save, but how will this lack of funds affect the property value over time?

The money it takes to keep community amenities intact and property values high is significantly more than what it’s been in the past. Inflation industry-wide has previously been 1%-3% year-over-year but has steadily risen to 7%-8%. Additionally, cutting back on services or maintenance updates can lead to the need for larger projects in the future, which would incur unexpected and often expensive costs.

Short-term decisions must take into account what’s best for the HOA long-term. And funds must be allocated wisely in order to prevent budgetary restrictions down the road and preserve property values.

Our HOA management team is here to provide guidance and support for your budget planning needs. Contact us today to get the conversation started.



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