Tips to Lower HOA Fees & Keep Your Budget in Check
Effectively managing the funds of a homeowners' association (HOA) is a key board responsibility and vital to preserving the financial health and stability of the community. It's a task that requires careful attention, collaboration, and strategic planning from board members. Here are some essential practices to achieve successful HOA budgeting and financial management.
Understanding HOA Fees
HOA fees are monthly, quarterly, or yearly dues that all members must pay. This money is used for the upkeep of neighborhood amenities and shared spaces and contributes to operational expenses and reserve funds for necessary maintenance in the future.
Efficient Budgeting and Spending in Your HOA
A well-structured budget serves as a roadmap for the financial journey of an HOA. It outlines the allocation of funds for various expenses, ranging from maintenance and repairs to amenities and community events. Straying from this budget can have significant repercussions for an HOA.
Financial instability can cause increased fees, special assessments, and a decline in resident satisfaction. When communities don’t stick to a budget, it may lead to neglected amenities and compromised services, too. To prevent such scenarios, board members must be proactive in managing the association's finances.
Here are seven ways to keep your HOA budget in check and keep fees low.
1. Form a budget development committee.
The budget development committee should consist of volunteer homeowners, be led by the board treasurer, and receive input from the HOA president, community manager, and other professional partners. Budget committee members should:
- Review financial documents and budgets from the past years.
- Evaluate upcoming maintenance expenses.
- Assess how much needs to be set aside for reserve funds.
- Find ways to save on costs and source funds.
- Monitor and stick to the HOA’s annual budget.
- Create a budget that balances income and spending.
2. Maximize service contracts.
Periodically evaluating service contracts guarantees the association receives the best value for its investment. Renegotiating contracts and investigating alternative options can lead to cost savings without compromising service quality. Some things to look for include:
- Expiration dates of contracts. Agreements that include a CPI (Consumer Price Index) clause could increase expenses.
- Services listed in your budget that aren’t yielding results or are unneeded.
- Special deals or referral offers.
If you see any discrepancies, discuss the matter with your supplier or service provider and explore potential solutions.
3. Hire a management company.
A board may consider hiring a professional management company to oversee operations by offering access to procedures, personnel, and business equipment. Although it comes at a cost, this can, in turn, bring a wealth of financial expertise to your HOA and help you save time, effort, and money. Professional managers can:
- Optimize budgets.
- Oversee day-to-day operations.
- Develop a solid annual budget.
- Keep records.
- Ensure compliance with regulations.
4. Review insurance policies.
Association insurance is one of the costliest line items for an HOA. Therefore, regularly review your association's insurance to confirm coverage is adequate and competitive. Adjustments to policies can result in substantial savings without losing necessary coverage.
5. Prioritize regular maintenance.
Establish a schedule for routine maintenance checks to prevent costly repairs down the line. A seemingly minor toilet leak could lead to the wastage of hundreds of gallons of water daily. That’s why addressing issues promptly can extend the lifespan of your amenities and common areas and help you allocate maintenance funds for repairs needed throughout the year. Have the inspector check for the following items to mitigate expenses and risks down the road:
- Peeling paint and cracked sealants.
- Water leaks in the sprinkler system.
- Broken lighting.
- Safety hazards in common areas.
6. Exercise budget transparency.
A lack of financial transparency is a huge point of frustration for many homeowners. When board members aren’t honest or forthcoming about how residents’ hard-earned money is spent, they’ll feel out of the loop. You can achieve budget transparency by:
- Sending out budgeting updates.
- Keeping messages short and frequent.
- Overcommunicating rather than not saying anything at all.
- Getting residents involved in budget or finance committees.
7. Go digital and embrace technology.
Transitioning to a paperless approach and communicating with dedicated HOA software can save your HOA time and money. You’ll deliver the convenience residents expect and deserve and won’t need to spend on paper, ink, envelopes, stamps, and employee labor. Some other areas technology can help include:
- Maintenance: Assign and create work orders, set priority and due dates, and track project progress.
- Administrative tasks: Residents can access important information, get answers to their FAQs, and reserve amenities instantly.
- HOA dues and payments: Automate online payments to reduce delinquency and manual check processing.
- Vendor services: Keep track of information like license expiration, prices, and more.
HOA management software like TownSq allows you to centralize communication, automate administrative tasks, simplify accounting and financial tracking, and so much more.
HOA Budgeting Made Easy with TownSq
HOA budgets can be a hassle when you don’t have a plan. From establishing a budget committee to exercising budget transparency, implementing the seven tips above will put your HOA on the road to financial success. To make this process easier, we have comprehensive HOA software that you can use daily to communicate with residents, set up budget guidelines, announce fee changes, and so much more! Request a demo today for the all-in-one solution, TownSq, today.