The economy goes through ups and downs and this makes effective financial planning even more important. When it comes to managing your HOA, you want to make sure that your reserve funds are adequate to cover emergency expenses and future repairs. Having a trusted financial advisor or banker can be beneficial, but make sure your HOA board also has some basic financial knowledge to support sound decision making. Here a few things to keep in mind when managing your reserve fund:
Update your reserve study. If your HOA hasn’t conducted a reserve study in a while, it may be a worthwhile investment. This will give you a better idea of the current state of both the physical and financial status of your HOA. As a result you can determine what types of future repairs may be necessary and estimate costs. You will also have a more solid understanding of the available funds to deal with any emergency maintenance issues that arise now.
Consider investment options. Strategic investments can help to grow your reserve fund and provide more financial stability. Most HOAs prefer 100% risk-free coverage, which is understandable. As you look at options, balance security, liquidity, and investment yield, you may opt for some short-term investments and some long-term investments depending on the size of your reserve fund.
Spend wisely. When repairs or improvements are needed, shop around to find the best return on your investment. Going with the least expensive option is not always the best choice in the long run. Spending a little more for higher quality results can save you money in the future. Also ensure that your investment plans make it possible for you to access the funds necessary to make repairs when you need them.
Seek professional assistance. If you’re unsure of how to effectively manage your HOA reserve funds and budget in general, consider hiring a financial advisor. After all, finance is their job and they can help you to avoid making costly errors. Always check with your state’s regulations to verify how and when funds can be used and invested.
Be strategic in the way you manage your HOAs finances so that you can continue to provide high quality service and keep your community running smoothly.