Neda Firouz - Increasing Income in HOA Budgets

HOA Budget - Increasing your Income by Neda Firouz



As a community manager, I have come across many homeowners associations, each of which have unique needs. Lately, we have found that interest rates have plummeted! This does not just affect homeowners associations, but each of us as individuals. If you do not live in a homeowners association, you may be able to learn a few tips from this blog, so keep reading...



With more stringent reserve measures, Board of Directors are faced with the difficult task of properly budgeting not just for the upcoming year, but for the general future of the community. Often times, this may require dues increases and/or special assessments. With a steady incline in delinquencies and the current economic climate, increasing assessments and collecting funds have become more difficult. With a little research and work, producing more income without assessments is possible. Here are a few areas to focus on that may have tremendous impacts on your budget:

Many communities invest their reserve funds with brokers, but interest rates have not been as competitive as they were in the past. If you are an individual reading this blog, you may have experienced that your bank is also not offering competitive interest rates. If you are currently earning less than 1%, you may consider researching alternative options. The CDARs program has been one solution for some Associations (and individuals). Many of the banks that offer this program offer interest rates at 2% or more, and you can invest up to 50 million dollars and still be protected by FDIC insurance. For more information, you can visit http://www.cdars.com/_docs/news-articles/SmartBusinessCDARS.pdf. When working with various banks that participate in the CDARs program, many of them offered to first open a CD account at a much higher rate. The highest I found was 3.25%. As you know, the FDIC Insurance limits have been increased to $250,000, so you can invest somewhere around $240,000 with the bank directly, then invest the rest of your reserve funds through the CDARs program. Alternatively, if you need to keep some funds liquid, there are banks that have HOA departments that offer rates of 2.25% or greater for Money Market accounts. For homeowners associations, you can contact banks that have HOA departments. If you want references to those institutions, feel free to send me a comment.

Other income producing methods include locating vending machine companies that will offer a percentage of their sales back to your community. You can also promote paid advertisements in your community newsletters as a means to generate more income, or at least offset your printing costs.

Then, there are those communities (predominantly condominium Associations) that have limited storage space within the units, and they also have strict Rules and Regulations regarding patio/balcony storage. One of the suggestions that has worked for homeowners AND the Associations is to have the Association purchase fire proof storage spaces for the subterranean garages. There are construction stores or products offered online that sell the storage spaces from anywhere between $500-$2,000 per space. Remember that it is important to find fire proof spaces because of the possible fire hazard. Also, before purchasing the storage spaces, make sure to talk to your insurance agents to confirm that your carriers will not have liability issues. In any event, depending on the demand in your community, the general storage rates range between $50-$100 per month. Your Association can earn back the initial investment in as little as ten months, then generate income for the future. Lastly, remember that this would be a new component that the Association would be responsible to maintain and replace, so if you decide to implement this suggestion, let your reserve study company know so that the storage spaces are added to your reserve study and factored.

Also, take a look at some of your utility expenses. There are many rebates and free products available to help cut your utility usage. I will be blogging about utility expenses in the near future.

Again, if you have any questions above the CDARs program, banking options, income generating ideas, etc., please do not hesitate to leave a comment.

Sincerely,
Neda Firouz