At the end of every year, many companies are directing their focus to the future and begin preparing the annual budget for the year to come. Homeowner Associations and Condo associations are no different, as they engage in formulating their budget season this year. In this article, we would discuss how to create a condo association budget for successful property management. Here are ten tips:
Create a Budget
I know it sounds like a simple idea, but we have seen many groups that didn’t make a budget before moving on to the next year. Without a financial plan, a Condo association will be in the same mess as any other business or organization when they realize they don’t have enough money to cover all their costs for the year. Spend some time being financially responsible for your group.
Review the budget/financial history of your association
Always look at the last two budget plans to see where your association is now and where you want it to be. People often look at the budgets from the year before to plan for the coming year. Make a plan to make sure that the budget is adjusted accurately.
Prioritize Projects
All projects or future repairs should be prioritized accordingly. Here you need to differentiate your association’s needs against their wishes. You must remove any potential liability or responsibility before you explore any proposed community beautification.
Increases in utility
Water, gas, and electricity costs have risen steadily over the last decade, especially in the last two years. It is best to research local cities and municipalities to see if they have a price rate schedule available.
Supplier Contracts
You always want to ensure an appropriate condo association budget for all of your regular monthly service providers. Do not be afraid to ask your landscaping company, pool contractor, and even the management company if they are considering altering their current rates.
Budget Reserves
All associations need to plan how much of their income will go into their savings accounts or reserves. The percentage of income does depend on their association, though. Some Condo associations save up to 20% of their total income for the long term. Condos have a lot more expenses, like fixing the outside and taking care of the streets and private roads. If there are no budgetary reserves, there could be big problems and big special assessments in the future.
Cover your Insurance franchises
Make sure you know the levels of the franchise for the different parts of the compound. For example, if the cost of replacing the roof of each building is $500 and you have 20 buildings, you still need at least $10,000 in your reserves to pay for that. If a disaster or severe storm strikes your area, you want to make sure that your association is ready and that you do not strike for a special assessment to cover only the necessary insurance claims.
Evaluate your legal and collection costs
Legal and billing fees can increase very quickly depending on the collection strategy you use. Evaluate your current system and see if you can determine your ROI.
Special evaluations are for special projects
If your association is having trouble paying its expenses because cash flow is low, you need to raise the number of assessments or how often they are taken. Special evaluations are exactly that: they are different. Your expenses are not paid by them. They should only be used for urgent needs or repairs, not for paying the pool contractor.
Stay on Course
During the year, it’s easy to get sidetracked by things like better landscaping, new and better safety systems, and other random projects. The budget for your condo association was made for a reason, so try to stick to it as much as possible.
A budget for the Condo Association needs to be made and kept up-to-date for the Association to be financially responsible. With a few small changes, even groups that aren’t in great financial shape can be in good shape in a short time. If you do these few simple things and keep evaluating and making changes over time, your Condo Association will do well financially now and in the future.
ProRealty specialized in Condo Association Management. Call us today at 888.230.1578 or email david@prorealtyusa.com for a free condo association assessment.
