Planning Can Save Time, Money, and Effort
By Trycia Arencibia ©2019 Community Associations Institute
It's that time of year again—budget season. For homeowners association boards, this can a huge undertaking. Figuring out how to disburse funds can be stressful, but it does not have to be. From managing the day-to-day operations to considering reserve funds for potential natural disaster damages, association boards need to plan when putting together their financial strategy.
Protect Yourself Accidents happen, but that doesn't mean you can't be prepared for them. Community associations are required to have active insurance policies to cover the property from potential loss or damage. Various policies should include general liability, workers compensation, fidelity, and directors & officers insurance. These policies should be renewed annually and start at least 90 days before the policy expires. It's important to shop around to ensure you are getting the most complete coverage at the best rate. If shopped properly, many associations experience a decrease in the cost of insurance.
Shop Around Most associations have an operating bank account and a reserve account. The operating account is an active bank account with deposits and withdrawals being made weekly to maintain the property and deposit maintenance fees. The reserve account is less volatile, with deposits made monthly or quarterly for the long-term preservation of the property. These funds can be placed in interest-earning accounts. It's important to do business with banks that work closely with community associations and shop around for the best interest rates. Reserve funds that won't be needed for five or more years can be invested in a certificate of deposit program. If you have major maintenance projects, for example, planned for this year, mangers should work with their bank to establish a line of credit.
Preventive Maintenance Taking care of your community and the equipment it takes to run your association may be the biggest opportunity to reduce long-term costs. Community associations should create a comprehensive preventive maintenance program for all the equipment on the property. It's equally important to secure maintenance agreements with dependable vendors and implement a maintenance work order system to create a history for individual pieces of equipment. In the long run, an association that follows these steps will significantly reduce the amount they spend on repairs and maintenance. If taken care of, equipment can perform beyond its expected shelf life, which reduces long-term investments and allows your reserve dollars to produce more interest.
Property Payback Community associations that do not maintain their property or rehab aging assets can experience an overall decline in property values. Many communities do not understand the correlation between property values and a well-maintained community. Whether creating reserves or implementing special assessments, it's important to have funds available to invest in the community. An aging property that redesigns its clubhouse, upgrades its fitness center, or performs regular inspections of its pool will see its investment pay back in increasing property values. Plus, it creates a sense of pride for homeowners that can help create a more cohesive community.
Lush Landscaping The first thing many homeowners, residents, and guests notice about a community association is the quality of its landscaping. Much like project improvements made to the interior of a building, the landscaping of a community creates curb appeal and impacts the first impression of the property. Contracting with a quality vendor can help keep a community looking pristine. To keep the landscaping lush, it is critical to ensure that an association's irrigation system is operating efficiently. If a community's landscaping is poorly maintained, plants, trees, and shrubs will die, rendering the property undesirable. Such a scenario can cause property values to decline and drive up costs to replace irrigation systems and foliage.
Budgeting season can be a taxing time for community managers. However, planning for the foreseeable future can save community associations time and a whole lot of money.
Trycia Arencibia is the managing director, department of finance and technology of Miami-based KW Property Management & Consulting, which is one of the largest residential property management companies in Florida. Visit
www.kwpmc.com for more information.____________________________________________________________________________________________WANT TO READ MORE?
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