Summer is the time for large maintenance and landscape projects and that means spending the big bucks. Too often, HOA discover that they don’t have the money to cover these large expenses. This usually leaves the association with the choice to either impose a special assessment or get a loan. So what one do you choose?
Every Reserve Study gives you three key pieces of information, useful for annual budget planning and owners disclosure purposes. Knowing what to look for will save you time and allow you to more effectively communicate those results to others. The three results are:
Every Reserve Study has two parts: information on the physical condition of the property and the financial analysis that consists of results computed based on that information. While every Reserve Study should have a similar
We know a few things about the future: that it will come, and that it will probably not be exactly what we expect. In order to minimize the number of these future “surprises”, we counsel associations to prepare for the expenses that are predictable. Expenses that can be anticipated fall into two categories: the Operating Budget (for daily/weekly/monthly expenses), and the Reserve Budget (for large expenses that occur annually or less frequently). The larger expenditures, and thus the larger opportunities for failure, fall into the realm of the Reserve budget.
How often is “proper” or “prudent” Reserve planning? With Reserve contributions making up 15% to 40% of the typical Community Association’s budget, this is an important question. So let’s look at the issues…
Reserve contributions allow you to offset ongoing deterioration with appropriately sized Reserve contributions. The more deterioration there has been, the larger the association’s financial assets should be.
Our country is in the middle of an economic downturn fueled by excessive optimism. Too many Americans borrowed money for a home, driving up prices, with little or no margin to handle mortgage payments. They were sure that their income would remain stable, and they were sure that the home would increase in value enough that they could refinance if things got tough. Well, things got tough, but not the way anyone expected.
