Homeowners Associations have become synonymous with housing management in the United States. Nearly two-thirds of homeowners in the US live in HOA communities and about 8000 new homeowners’ associations are formed every year. Winston Salem is no exception. Property owners here often choose to be a part of communities that are part of such associations.
A Homeowners Association (HOA) is a group of people elected by homeowners in a community to manage the finances, enforce HOA rules and regulations, and oversee the maintenance of common spaces. For this, every HOA has a fixed budget.
The budget plays a vital role in planning the expenses of the community for the upcoming year. To perform its duties effectively, the HOA decides on an operating income-expenditure plan.
The Purpose of an HOA Budget
The key purpose is to ensure that the community functions smoothly. For this purpose, HOAs charge a monthly or annual dues assessment to all their homeowners. Assessments are utilized for carrying out various responsibilities in addition to the maintenance of the property, and that of shared amenities like sidewalks and swimming pools.
Additionally, the HOA maintains an operating budget it uses to establish the proper amount of due assessments, hires professionals like accountants and attorneys, and allocates the amount for insurance coverage within the stipulated budget.
It also plays a significant role in maintaining and enhancing the property value. The lack of an efficient plan can lead to improper maintenance, creating a negative impression among potential buyers and reducing the value of the Winston Salem rental property.
How Does an HOA Create a Budget?
While creating an annual budget it is very crucial to factor in every expense that can arise. This helps you plan your dues, and determine your total expenditure.
Here are a few key things to be considered while creating a financial plan:
- Include essential items
The HOA must always first consider essential services for the community. These include water supply, electricity, gas utilities, insurance, repair and maintenance expenses, and management fees. The revenue and expenditure planning has to accommodate the uninterrupted provision of these services.
- Adopt best budgeting practices
Predicting future expenses can be tricky at times, which is why the HOA must consider the current state of the economy while creating the plan. Additionally, factoring in dues and leftover funds from the previous year can also supplement the planned disbursement.
- Plan strategically
Having a long-term plan is always better, and hence, along with the yearly budget, the HOA must also consider making a 3-5year financial roadmap. Planning expenses ahead of time can help allocate funds accurately. Also, not all homeowners may pay their dues on time. Hence, it is necessary to decide the budget accordingly.
- Analyze and reduce expenses
Expenses can be analyzed by an annual financial review. One can identify the costs that can be avoided, and thus plan more effectively for the forthcoming budget. You may want to adopt several innovative ways to reduce expenses. For example, installation of solar panels, implementing water conservation techniques, or hiring professional vendors might reduce expenses in the long run.
- Prioritize the needs of the community
The HOA budget must reflect the community’s priorities. Make sure to consider and address the main concerns of the community, and accordingly make informed decisions.
Planning and managing funds can be time-consuming and requires precision and skill. A property management company that specializes in HOAs can take the load off your hands and help you create a budget that suits the needs of your community. Connect with us at Capstone Realty Consultants for further assistance regarding HOA budgets.