An important factor to understand when managing an association is the difference between Maintenance and Capital Improvements. Each can take many forms, but there is a key distinction between the two. Understanding that distinction is crucial to financial and physical aspects of community association management.
Why You Need To Know the Difference
At the simplest level, Maintenance refers to repairs or construction that restores an asset to its original condition, or to prevent further deterioration. Capital Improvements refer to work that enhances the original condition or increases the value of an asset. The distinction matters because while maintenance is considered an expense—you’re spending money without gaining value—capital improvements are investments. They provide added worth and benefit to your community.
Sustain Your Assets With Routine Maintenance
What are assets in your community? These can be current or fixed—that is, items that will be converted to cash within a year versus long-term property such as equipment, buildings, or vehicles. Routine and preventative maintenance are classified as repairs or actions taken to restore that state of an asset to a certain quality, to prevent further decline, or to take the place of a part that has exceeded its “useful life.” These can be everyday fixes like changing air filters, basic landscaping, minor interior paint jobs, simple repairs and restoration. These can also serve as temporary repairs.
What do we mean by useful life? To put it simply, this is the expected lifespan of an asset
Increase Your Value With Capital Improvements
Sometimes an asset requires more than basic repair, or you want to elevate it to a superior condition. These boosts in worth are classified as capital improvements, and are considered investments in your community. Upgrading your security system, switching to more efficient lighting and electricity, enhancing your pool area—these are all optional developments that increase the value of your property. These improvements can extend the useful life of an asset.
Occasionally, routine maintenance can take an unexpected turn into a larger project. What initially seems like a burnt-out bulb ends up being a critical wiring issue, requiring a grander-scale project. While this can be surprising and challenging, keep in mind that the additional scope will provide added value.
Make Each Project Work For Your Community’s Needs
You can take each project as it comes when deciding whether to classify it as maintenance or capital improvement. Weigh the factors carefully, including the asset’s value, the proposed outcome, the project’s scale, and the value of the actual outcome.
Knowing the ins and outs of these decisions isn’t always easy. The right hoa management company can help navigate situations and ensure you’re making the right choices for your neighborhood. Learn more about how we can help manage these situations in Dallas, Fort Worth, Denton, and greater metroplex communities