It's important to understand the HOA budget. Below I have provided a sample Florida HOA budget for an imaginary community. I made up the figures, so don't spend too much time wondering how I came up with some of them. The point was to simply let you see what a proposed budget might look like when you are looking at a community with an association, be it a homeowners' association, or a condo association. A condo budget that you are given could have more expense categories or it could have less, depending on the level of services provided. Regardless of the budget format, there are three things that you will want to look for whenever an actual budget is placed in front of you.
First, look at the Developer's Contribution. In the case of the sample budget provided, it is $105,000 in 2007. It's important to know how much the developer is kicking in to keep the HOA in the black. By doing some quick and dirty math, you can determine how much your dues might increase after the HOA turns over to the residents. In this case, simply take $105,000 divided by 150 (current number of homes) and you are left with a $700 budget shortfall for each home. Divide $700 by 12 to get the monthly amount of $58.33. In theory (keep in mind these are all imaginary numbers), your dues would be $58.33 higher per month, post turnover than they actually are right now.
The next item to look at is the projected Loss at Buildout. In the example, this figure is $40,000. You can also use this figure to determine how your dues will be affected. Take $40,000 divided by total number of homes (200) and you come up with a $200 budget shortfall. This amounts to $16.66 extra per month that each homeowner would have to pay.
Last, but not least, take note of the "Reserves for Replacements". In the sample budget, these reserves are grossly under funded. A good reserve fund should account for at least 10 to 20 percent of an association's annual operating budget. If it takes $480,000 to run each year, then the reserve fund should be at least $48,000. The reserve for replacements fund is there to pay for things like the repair of streets (if they are private, usually in a gated community), a new roof for the clubhouse, the resurfacing of the swimming pool, and other items that will come up after a few years of wear and tear. It is very important that it be well funded and maintained.
Boomer Paradise HOA Proposed Budget
January 1, 2008 through December 31, 2008
|
|
2007 Proposed |
Buildout (Completion) |
INCOME (# of Homes) |
|
150 |
|
200 |
Dues (@ $200/month) |
|
360,000 |
|
480,000 |
Late fees |
|
0 |
|
0 |
Initial Fees |
|
0 |
|
0 |
Developer Contribution |
|
105,000 |
|
0 |
TOTAL INCOME |
|
465,000 |
|
480,000 |
EXPENSES |
|
|
|
|
Homes |
|
|
|
|
Lawn Care |
|
55,000 |
|
62,000 |
Spray and Fertilizing |
|
12,000 |
|
15,000 |
Pressure washing |
|
8,000 |
|
11,000 |
Cable |
|
60,000 |
|
70,000 |
TOTAL HOMES EXPENSE |
|
135,000 |
|
158,000 |
Grounds |
|
|
|
|
Labor |
|
30,000 |
|
40,000 |
General Maintenance |
|
15,000 |
|
20,000 |
Grounds Maintenance |
|
65,000 |
|
75,000 |
Spray and Fertilizing Common Areas |
7,000 |
|
9,000 |
Water & Irrigation |
|
8,000 |
|
10,000 |
Electric Power |
|
23,000 |
|
25,000 |
Lake Maintenance |
|
15,000 |
|
15,000 |
Gate Maintenance/Repair |
|
8,000 |
|
8,000 |
TOTAL GROUNDS |
|
171,000 |
|
202,000 |
Clubhouse/Community Center |
|
|
|
Lawn/Landscaping |
|
25,000 |
|
25,000 |
Pool Service |
|
30,000 |
|
30,000 |
Cleaning |
|
6,000 |
|
7,000 |
Electricity |
|
20,000 |
|
20,000 |
Water and Sewer |
|
5,000 |
|
5,000 |
Irrigation |
|
1,000 |
|
1,000 |
Repairs/Maintenance |
|
3,000 |
|
3,000 |
Cable/Internet |
|
1,500 |
|
1,500 |
Phone |
|
500 |
|
500 |
Activities Director |
|
30,500 |
|
30,500 |
Legal Expenses |
|
1,500 |
|
1,500 |
Insurance Liability |
|
10,000 |
|
10,000 |
Insurance Building |
|
10,000 |
|
10,000 |
TOTAL CLUBHOUSE |
|
144,000 |
|
145,000 |
Reserves for Replacements |
15,000 |
|
15,000 |
TOTAL EXPENSES AND RESERVES |
$465,000 |
|
$520,000 |
Profit/Loss |
|
$0 |
|
($40,000) |
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