The Hidden Costs of HOA Budgeting: Avoid These 4 Common Mistakes
When creating an association budget, there are several things that might not immediately come to mind. Be sure to account for these four expenses so you don’t go over budget in 2024.
1. Reserve Study Review and Update: A reserve study involves assessing the long-term capital needs of the community and planning for major repairs and replacements of common assets, such as roofs, roads, and amenities. Make sure to review the reserve study every year and update project timelines and costs. A reserve study conducted in 2020 is going to look different than one conducted in 2023.
2. Bad Debt: Bad debt budgeting plays a crucial role in maintaining the financial stability of your association. The bad debt budget refers to the allocation of funds to cover potential losses resulting from unpaid assessments or delinquencies. Review your delinquency report and be honest about the situation. Assuming you will collect every dollar of assessments when reports tell a different story may lead you to cashflow problems.
3. Filing and Paying Federal Taxes: Association’s, as nonprofit corporations, are typically required to file federal tax returns. Though it is rare that an association is required to pay taxes to the Federal Government, there is a cost to hire a qualified tax professional to complete the tax forms.
Bonus: You can view your association’s status by going this the Ohio Secretary of State Website (https://businesssearch.ohiosos.gov/). If your status is Expired or Cancelled you may be personally liable for actions of the association.
4. Property Taxes: Though HOAs are more likely to own land than condominium associations, the Country Treasurer expects timely payment of property taxes. Franklin County is currently doing a property reappraisal and you will be notified of the proposed property value in August. Be sure to pay attention to how increased values will affect your tax amount.
Bonus: If you believe that your property tax valuation is not accurate, you can appeal the county auditor’s value by filing a complaint against valuation with the county board of revision.
These may not apply to everyone, as each community's needs and priorities vary. It's crucial to assess the specific requirements of your community and tailor the budget accordingly.
by Arnold Barzak | Capital Property Solutions