Beyond basic maintenance projects, you’ll have large-scale repairs and improvements that are known as Capital Improvements. These can be costly, but proper planning and budgeting will keep you from breaking the bank to keep your neighborhood up-to-date and looking nice.
Create a Suitable Budget for Your Association’s Needs
There is no magic number when it comes to how much money you’ll need to successfully run an association over a fiscal year. Too many factors, including the number of homes, number of residents, community amenities, and even your geographic location all affect how much you’ll need and how you’ll use it. Regular maintenance and services can be accounted for ahead of time, but wear and tear over time, weather (including natural disasters in certain areas) and resident accidents simply can’t be.
When you create your budget each year, keep this in mind. Make sure your reserves are well-stocked for the size of your community. Be smart about how you plan for the things you can anticipate, so you can focus emergency resources on actual emergencies.
Research Other Methods of Funding Ahead of Time
Rather than wait until an issue arises, get well-versed in your options for funding ahead of time. That way, when you find yourself in need, you know which avenues are best suited for your association or situation. If you have an emergency and your reserves are depleted or don’t cover the entire cost, some alternatives are:
- Apply for a grant. There are different types of grants available for HOAs needing money for major projects. These can be through private foundations, or through the city, county, or federal government. Enhancement Matching Grants allow you to apply for assistance for specific types of neighborhood improvements as well.
- Charge a special assessment. In dire cases, you can charge your residents an additional sum of money (on top of their monthly dues) for special projects. You’ll need to know when you can or should levy this versus a Capital Improvement Assessment and the requirements for notifying and/or voting on the charge.
- Take out a loan. For most HOAs, this is a last resort option. Because of interest rates, this is a significantly more expensive route to take, and paying back the loan over time could affect future financial needs.
Funding Capital Improvements is an inevitable part of running an HOA. How you prepare yourself with knowledge and resources can make or break your association. Read more about HOA funding, Capital Improvements, and other financial issues on our blog, or reach out to us if you have questions or concerns about your HOA’s financial situation.