An illustration of a tan brick building with windows of various shapes surrounding three balconies. Clockwise from the far left, a bearded, red headed man leans out of his window and is handed a pie by a woman in the window to the upper right of him. The woman is wearing an apron and has a red bandana on her long, dark hair that is bound in a single braid. A child with long, dark, curly hair stands behind her. In the window to her right, a woman with down slanting eyes and loose, dark hair is exchanging coffee cups with a woman in the window to her right. The woman to her right has deep brown skin and her dark hair is cut into a medium length bob. To her lower right, a woman with very long, straight hair is passing a parrot in a bird cage to a man that is to her lower left, standing on a balcony. The man has dark hair and a beard. Next to him, a caramel colored short hair dog has its front paws on the top of the balcony railing and is looking excitedly towards the bird. On the middle balcony, a fair skinned, blonde woman is being handed a book by the woman on the balcony to her left. The woman handing her the book has medium length, dark hair that is pinned away from her face. All of the neighbors are smiling and are happily engaged with each other.

The Multi-Family Home HOA Budget

The HOA budget

The homeowner association annual budget can often be a source of homeowner consternation and confusion. To minimize community association Board of Directors’ liability, have a professional involved with the creation of your community association annual budget.  While the budget is always decided by the board, a professional association manager can guide the process and make recommendations. Your homeowner association management company contract may include help with the budget process; if so, this should be clearly outlined in the contract. If your common interest community is self-managed, however, or if budgets are not one of the services your community has contracted for, then this easy budget template is a helpful tool for your HOA.

 

How is an HOA budget determined?

The association budget decides the amount of each homeowner’s annual obligation to the association. An easy way to think about this is:

This image is simple black text on a white background. The text is written similarly to a math problem. It reads, "Homeowner Annual Obligation" then an equals sign. To the right of the equal sign is written, "Annual Association Budget". There is a line under that phrase, implying that the words should be divided by the phrase under the line. Beneath the line is written, "# of homeowners". The complete image demonstrates how an HOA budget is usually distributed, although this depends on the governing documents.

 

While it may be tempting to hack and slash when first laying eyes on the budget, as an association board member it is crucial to remember the HOA Board has a fiduciary responsibility to maintain and insure the community association properly. Therefore, there are at least two line items in the budget for any common interest community: insurance and maintenance. The Board’s fiduciary responsibility also extends to the future. Therefore, there should always be at least a third line item called Reserves or Reserve Account.

 

The HOA Reserve Account

The reserves are there to support future capital expenses, both planned and unplanned. A reserve study, done by in conjunction with an engineer or reserve analyst, is a study of the physical and financial health of the association. Many states have requirements for the frequency of the study and what must be reviewed during the study.

Beyond insurance, maintenance and reserves, each association will have additional line items based on their unique structure and components. Common line items, such as utility obligations, are included on the HOA Annual Budget Template shown below. Click on the image to download a blank budget template for your property owners association to use.

 

A spreadsheet with a white background and green and blue header bars. The spreadsheet shows an HOA budget for a multi-family home association.

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