Whether you’re planning on taking the burden of the yearly budget upon the shoulders of your condo association board or are seeking the assistance of a Tampa condo management company, the annual budget is one of the most important items on the agenda of any condo owners association. The budget affects the ability to maintain your community, make repairs when needed, and set funds aside for future repairs, replacements, or upgrades. Without a proper budget, your investment may decline and the need for special assessments can increase.
With that in mind, we’d like to share five tips for your condo association board to help ensure your community has a functional budget in place.
Related: These 4 Budgeting Basics Are Crucial for a Successful Community
1. Review Past Budgets
The first and arguably most important step in creating a condo association budget is to review your annual budgets for the previous years. Looking at past projections and how they compared to the actual expenses will allow you to identify any trends and avoid making the same mistakes in the future. For example, you may find that actual maintenance costs for the community always end up being much higher than the projections. This means that your condo association has been consistently under-budgeting for maintenance and can improve the budget by allocating more funds to this aspect of the community.
2. Reassess Vendor Contracts
Each year, the planning of the new budget provides a great opportunity to reassess all of your current vendors and insurance plans. It’s important to take the time to do this for two reasons. First, many vendors and insurance providers will increase the cost of their products and services on a yearly basis. Second, you’ll get a chance to ensure you’re still getting the best product or service for the lowest price. To do so, we recommend calling your current vendors to see if they plan to increase rates and review your current contracts to determine if any clauses allow for annual increases. If your contract is up for renewal, don’t be afraid to request bids from other companies to help lower or maintain costs.
3. Analyze Your Reserve Funds
Condo association reserve funds are a portion of collected association dues set aside for major expenditures, such as large-scale repairs or renovations. This could be extensive landscaping, new roofing, a playground installation, or anything in between. In general, it’s essential to conduct a thorough reserve fund analysis each year to get a sense of which (if any) projects need to be tackled quickly. For example, a large-scale repair to correct a potentially unsafe or structurally unsound aspect of the community would come far before non-anticipated fund expenditures like paving. Then, review the money your association currently has in its reserve fund. This will help you understand whether monthly dues can be raised to cover costs.
Related: The Difference Between Operating and Reserve Funds
4. Budget for “Hidden” Expenses
Are you aware of any forthcoming lawsuits and the potential associated costs? Are there insurance claim-related projects or deductibles that are not part of the typical annual budget? Will a Special Assessment incur additional administrative costs that it has not incurred in previous years? Has there been a substantial change in owner delinquencies that would call for the allowance for bad debt to be adjusted? These are all “hidden” expenses you need to keep in mind when creating the annual budget for your condominium association.
5. Set Monthly Dues for Condo Owners
Now that you’ve done the majority of the legwork, it’s time to review your estimated monthly expenses, including funding your reserves and hidden expenses, and determine the annual income needed from condo owner dues or owner sources. Take the grand total and allocate it as required (either by percentage ownership or split equally) to each condo owner as the new monthly fee. Be sure to communicate to the condo owners how the board came up with the budget, paying special attention to highlighting how any increase in fees will help maintain and improve the condo owner’s investment over the long run.
For professional assistance with drafting your condo association budget, please get in contact with one of the top Tampa condo management companies — Wise Property Management.
Are you ready to work with a Tampa condo management company that makes life easier for you and your fellow board members and improves the value of your property? If so, submit our proposal request form today!