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Brooklyn Property Management Blog of ProRealty

How to Create a Condo Association Budget for Successful Property Management

Brooklyn Property Management Blog of ProRealty

 

At the end of every year, many companies are directing their focus into 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 associations which did not create a budget before moving on to the following year. A Condo association like any other business/organization, without a financial plan, will be in the middle of a mess about halfway through the year when they realize that they don’t have enough to pay all the expenses for that year. Take time to practice financial responsibility for your association.

Review the budget/financial history of your association – always review the last two budget plans to fully understand where you are currently against where you want your association to be. Many people look at the budgets of the previous year to prepare for the future. Make a provision to ensure a precise budgetary adjustment.

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 beatification.

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 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 make a budget percentage of all revenue to go to their reserves or savings accounts. Of course, the percentage of income varies according to their association. Some Condo associations put as much as 20% of their total revenue on long-term savings. Condos have much greater financial obligations, including exterior repairs and maintenance of streets and private roads. No budgetary reserves can lead to significant problems and potentially be major special assessments in the future.

Cover your Insurance franchises – Make sure you are aware of the franchise levels for the various elements of the compound. For example, if the replacement of your roof is $500.00 per building and you have 20 buildings, then at least you still need at least $10,000 in their reserves to cover that amount. 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 struggling to cover expenses because of tight cash flow, you need to increase its assessment amount or frequency of assessment. Special evaluations are just that, special. They do not pay your bills. They are intended for urgent needs, or in the case of emergency repairs, not for paying the pool contractor.

Stay on Course – It is very easy to get distracted throughout the year with improved landscaping, new and enhanced safety systems and other random projects throughout the year. Your association made a budget for a reason, so try your best to stick to it as best you can. 

Creating and maintaining a Condo Association budget is an essential element of maintaining a fiscally responsible association. Even associations that are not so financially healthy, with some minor changes, can also be financially fit in a short period. If you follow these few basic steps and continue to evaluate and adjust over time, your Condo Association will prosper economically now and in the years to come.

ProRealty specialized on Condo Association Management.  Call us today at 888.230.1578 or email david@prorealtyusa.com for a free condo association assessment.

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