Let’s face it, there are a lot of expenses when operating a community association. HOA assessments generally seem to just keep going up. Board members may be thinking about saving money for the association, but are they looking in the right areas? The following tips are ways for associations to potentially save money by the time their next budget comes around.
1. Learn who the professionals are in the community and what skills they have.
It is a good idea to see who lives in your community and might be willing to help. Professionals such as engineers, attorneys, landscapers, property managers, accountants and appraisers all may have valuable information to contribute—or know the right person to get useful information from. You never know what you might be able to get for free. Engineers might be able to help with construction or land issues, accountants can help with financial issues, or a property manager can help be the voice of reason. One way of doing this is by maintaining a community website to easily and cheaply exchange ideas and information. Also, volunteers in the community are a big asset. Any person in the community willing to help do routine maintenance is one less vendor your association will have to hire.
2. Hire a reputable and experienced property management company.
Hiring the right property manager can be a very valuable asset to your community. Property managers have past experiences that will help them with your community. Chances are that they have put together a budget similar to yours in the past. Additionally, they often know the right specialist to talk to when a difficult situation arises. Have a difficult legal question—odds are good that they have worked with a good association attorney in the past to solve a problem. Property managers have access to a network of professionals that other people may not have access to.
3. Speak to other associations.
Other associations can tell you what their successes and failures have been. Learning what NOT to do from an older association may be incredibly important. Also, other associations can help you figure out what vendors provide excellent services and products and which ones they had a bad experience with—all from the same point of view you have. Even if you don’t know any other association’s board members, there are other ways to meet them. You could join a trade organization, such as the Community Associations Institute (CAI) or join an online community such as hoatalk.com, association-life.com, or hoa-usa.com.
4. Look very closely at your insurance policies.
Every association needs to have insurance policies, but often times they can be tweaked to be more in line with what you really need. Insurance is often the greatest expense of townhome or condominium associations in Florida. Townhome and condominium associations have policies for hazards such as hurricanes or tornadoes that cover building replacement. They may also have a flood insurance policy that covers building replacement. However, these building replacement values should come from an independent and qualified appraiser that knows which building components are included and excluded for each type of policy. This last point is very important. Getting an insurance policy for $30 million when the true cost of the covered components is $20 million leads to an enormous waste in unnecessary insurance premiums. Another point in the insurance category is to decide if your association can afford to move to a higher deductible. For example, you certainly need to have a general liability policy, but increasing the deductible would be a way to trim costs.
5. Have a contingency fund for relatively small maintenance items.
Having a contingency fund for unforeseen conditions or expenses can be very important. Not only are you being financially prudent by putting away money, you are also saving time by not making people vote or go through unnecessary channels on issues that are immaterial.
6. Lock in vendors for a longer term.
It never hurts to be creative when dealing with outside vendors. If their service is $5,000 for a year and you were going to hire them anyway, see if they will do a 2-year $9,000 contract or a 3-year $13,000 contract. For one thing it never hurts to ask. More importantly, it should be a win-win for both parties. Your association saves money, and the vendor has a guarantee of more money over a longer period of time. In these current economic conditions, many vendors will jump at the chance to lock in to more time on a contract.
7. Think into the future.
Similar to the last point, it never hurts to think about more than the next year. It will be much cheaper to solve a problem proactively rather than reactively. Contacting professionals for planning studies is very useful. An example of this would be to have a qualified professional conduct a reserve study. A reserve study estimates the remaining life and useful life of all major common elements such as painting, roofing, street paving (if streets are private), pool areas, etc. It also figures out the current costs and future predicted costs of replacing these assets. Subsequently, it forecasts funding models for the association’s reserve items. A reserve study is like having a road map for the association into the future.
Hopefully, these seven tips will be able to help your homeowner association or condominium association save money. Or at the very least, they are talking points to get the ball rolling at your next board meeting.