Attending to all the complex needs of a homeowners association (HOA) community is a lot of work. The Board of Directors is by definition a group of volunteers, and while they may have plenty of passion and vision, they don’t always have a lot of time or expertise. As such, the typical HOA community eventually enlists the service of professional managers.
As you prepare to hire an HOA management company, it’s important to be clear about exactly how the business arrangement works. Specifically, it’s helpful to understand exactly how property managers are paid.
At Kuester Management Group, we are pleased to provide a full range of HOA services in Charlotte NC, Huntersville NC, Wilmington NC, Myrtle Beach SC, and Fort Mill SC. We are always happy to share transparent pricing information with our clients and potential clients. In the meantime, here are a few broader points about how HOA management teams generate income.
How HOA Managers Make Money
1) Management Fees
The primary way in which HOA management teams generate revenues is through management fees.
The typical management fee is either a flat rate, or else a percentage of the HOA’s total budget. These fees cover the basic costs associated with managing the Association’s daily operations, keeping up with maintenance tasks, fielding inquiries from residents, and so forth.
2) Administrative Fees
On top of these basic management fees, some HOAs might charge additional administrative fees. These fees typically cover specific administrative tasks, such as processing insurance claims, handling legal matters, or managing special assessments.
3) Markups for HOA Maintenance
Some HOA management companies may mark up the cost of maintenance and repair services. In other words, they might subcontract maintenance and repair work to third-party vendors while charging the HOA more than the actual cost. They then keep the remainder as a pure profit.
4) Fees for Reserve Fund Management
One of the primary roles of the HOA management team is to help the community conduct a reserve study, or manage their reserve fund investments. The reserve fund is an important way for the HOA to save up for big, looming capital expenses, but this takes a lot of work from the property manager. As such, an additional fee may be levied.
5) Late Fees
Another purview of your management company is the collection of fines from HOA residents, including fines for rule violations or simple late fees. An HOA management company might choose to keep a portion of these fees as compensation.
6) Consulting & Special Project Fees
Also be aware that many property management companies offer their expertise for limited-scope projects, essentially working as consultants to help your HOA manage a major construction project, renovation, or other special task. Special project fees can vary wildly depending on the scope of the work.
How Much Should You Expect to Spend on HOA Management?
As you consider bringing in an HOA management company, it’s natural to wonder how many of your own resources are going to be tied up in management fees. The impact on the annual budget can vary according to a number of different factors. Some of these factors include:
- The size of your community (number of units and owners).
- The level of service (basic accounting only, full-service, or special project consulting).
- Your geographic location.
- Contract terms, including the duration of the contract.
Before you hire HOA contractors of any kind, make sure they provide you with clear, upfront pricing information. If you find an HOA management company that’s reluctant to share clear pricing, that’s reason enough to continue your search elsewhere.
Can HOA Management Save You Money?
One final note: While there are expenses associated with hiring an HOA management company, working with an on-site manager can potentially help you save money, or at least use your resources more efficiently. Consider:
- Working with an HOA management company ensures sound planning and strategy when it comes to your annual budget process.
- HOA management teams can help you minimize missing or delinquent payments from owners.
- An HOA management team will be able to negotiate the best terms with local vendors.
- Your HOA manager will also be able to free up time for your HOA Board members to focus on other important, value-adding activities, like community-building and casting a long-term vision.
The bottom line: Working with an HOA management team can be one of the best ways to increase profits and ensure your community runs smoothly. To find out more about the financial dimension of hiring an association management team, reach out the Kuester at your convenience.
