Ways to save money/increase revenues

You don't utilize fines/monetary penalties to increase revenue.
You use them as a tool to enforce covenants.

You increase revenue via increased assessments.

If you have a clubhouse, you could rent it out.
However, that rent would be taxable.
Additionally, there would be potential increased liability - so insurance should be reviewed.
If you rent to the public, you would need to become ada compliant.

You could invest the reserves.
However, the Board has a fiduciary responsibility to protect the capital.
Therefore, this tends to limit you to money markets and certificates of deposit.
Note: the interest/dividends would be taxable income.

Henry,
this is great idea!
Our property management company seems to use same vendors for specific works and that has raised some reg flags. Their comment is that they have worked for years with them and they give them the best break down.

Our property manager did the same thing (send the bids to the same companies), but usually because they also worked with other clients and so we’d get a discount because of that. However, the company’s internal maintenance department had a nasty habit of reviewing the bids when they came in on the fax machine and since we’d also give them a chance to bid on the work, they’d always underbid and get the work.

One of our past presidents found this out while visiting our property manager (she wasn’t aware it was going on). Needless to say, we stopped sending them bids for major work (they continued to do the routine stuff). We also had the RFPs sent directly to the property manager. Some of the board members would learn of other vendors whose work they’d seen and have the property manager send them RPFs.

So, how to save money? Augustin and Henry hit on some of the vital approaches – get more than one bid (the higher and more intensive the work the more due diligence you should practice) and don’t kick needed repairs down the road. No one likes spending money, but if you’re a homeowner, that’s part of the price of the ticket. It’s just a question of whether the house ends up being a major money pit because small repairs and maintenance tasks were ignored.

You could also talk to your association's master insurance policy about risk reduction – what can the association do to reduce the possibility of claims being filed, and hopefully the speed at which insurance costs go up?

Every year, review your costs to see what went up vs. what was budgeted and why. Maybe there were unexpected costs or you underestimated what the costs will actually be. Since 2022 has begun, this is a good time to review 2021 to see what you could do better. It’s not about ripping up the 2022 budget – at best, any budget is a guide and not written in stone because shit happens. But by having one, you have something with which to compare and help guide your decision-making.

Educating homeowners on what they can do to help save money can also help. For example, trash can create problems because it’s messy, stinky, blows around the community, and can cost more time and money to clean up. If you have dumpsters, homeowners should be told to use them properly (don’t dump illegal heavy trash like mattresses). If you have trash carts or regular trash cans, don’t overfill them, break down your cardboard boxes, etc. Encouraging recycling can also work – if your community doesn’t have a program, you may want to look into sponsoring one. It could be as simple as having a company coming out for a few hours once a month to collect aluminum cans, newspaper, electronic equipment (there’s an organization in my city that hires ex-cons to strip the equipment and sell the materials – they earn money the right way so they don’t return to crime).

If you have a website, use it to provide information instead of paper newsletters to save time, printing, and postage costs. You could also set up online forms so people can make maintenance requests, file exterior change requests, or apply to rent the clubhouse – which can cut down on processing time. Encourage people to pay assessments online – look into getting a resident portal to do it at a low cost or people can use their own bank’s bill pay systems, like automatic bill pay. That can reduce more printing and postage costs and you get the money in real-time.

If homeowners aren’t swayed by any of this, say “Surfside” to remind them of what happens when infrastructure isn’t addressed because people (the developer, board, homeowners, inspectors, and a bunch of other people) insist on being cheap or not doing the job properly.

(Sometimes I think people will fear saying Surfside the way they don’t say Candyman or Beetlejuice like in the movies!)

Tim,
We have done this through assessments and our reserve fund is invested.

It is correct that fines are to enforce covenants! By setting fines when a violation happens, you do increase your revenues.

Thank you!

Augustine,

We are a condo HOA of 191 units, and we have been existing since 1978. The building is old since 1969 and of course it is understandable that maintenance is an ongoing chore!

Over the last eight years the board had done little to safeguard the reserve fund and had been avoided assessment increases until 2020 when owners became concerned of the finances. There was no transparency, but these last two years new board members have been involved and interested to change the status quo.

In regard to the competitive bidding, the property management with over fifty buildings seems to use same vendors/contractors who have been trusted and perhaps giving to the company some kickbacks (?).
When the property manager was asked how many bids have been submitted for a specific project, the answer is that we did not seek for bids, we are using the vendor that we always use.

In regard to the reserve fund percentage, we are at 15% with major projects ahead of us, roof and hot water boilers replacement. This past year a finance committee was formed to work on the 2022 budget and work with the treasurer. Faced with some realities, we were able to get the owners approval of the budget and hire a CPA to review our financial records and a structural engineer to perform a study on the building and its components. Three years ago, we had an elevator assessment that we had to get a loan and this year we have a garage repair assessment that owners will self-assessed.

Thank you for your input and valuable information on your former condo!

SheliaH,

We do have an inhouse maintenance team as well. We have noticed that over the last eight years their motto was to patching building repair issues. We hope with the structural engineer's study this year we will face the reality and move accordingly.

In regard to the ways saving money, I appreciate your suggestions! Finance committee was able to get involved in getting three proposals from CPAs to review our finances and now the Board at the January meeting will select the one that fits our needs and budget.

Our website is still in developing stages, which is a BIG step for getting up to electronic times! The online payments has been used but not encouraged fully. We are in the process of revisiting the topic and we invited our bank representative to talk about the ACH payments. The newsletter and various announcements are done electronically.

I will certainly introduce the ideas of reviewing the insurance risk reduction, put an emphasis in educating owners for trash guidelines, search for sponsoring trash recycle company.

We have made progressive steps to improve the association's status but we still have a lot of work that it could be done!

Thank you once again!

CathyA3,

Collection of assessments - unfortunately, we do not have a clear picture how many fee delinquencies exist what the collection practices are.

Board - Short-term thinking was a characteristic of the board and do not raise assessments to keep owners quiet and at ease mistakenly.

Insurance - raising the deductibles option sounds worth to investigate.

Volunteers to perform work - valid points!

Thank you for your time and advice!

For the archives, the net is seeing more and more media reports of condos this old and older doing a full re-hab. The life expectancy of a building (without major renovations) is around 75 to 100 years. From a post of mine several months ago:

From Aug 2020, https://www.hawaiibusiness.com/condo-owners-beware-part-1/:

A Condominium Can Last Hundreds of Years, But Not Its Components

A 40-year-old Honolulu condominium can show its age in many ways: brittle, leaking pipes; cracks in its concrete walls and decks; rusted rebar; and corroded railings and window frames.
Dana Bergeman is the CEO of Bergeman Group, a local construction management company. He says many of Hawai‘i’s condominiums were built in the 1960s and ’70s and are reaching the point where they will need major infrastructure, cosmetic and architectural improvements to keep their value and remain liveable.
...
Kimo Pierce, president of Hawaii Plumbing Group, says condo associations should start looking at replacing their pipes at 40 years and be ready to start the project at 45 years. Once the pipes hit 50 years, he says, a condo is “on borrowed time.”

Cast-iron drain, waste and vent pipes eventually rust from the inside out. That can lead to clogged and cracked pipes and, eventually, water leaks. It’s during the investigation of these leaks that contractors discover if the pipes need to be replaced, he says.

There can be millions of feet of pipes and hundreds of units in a high-rise condo, so the process to repipe involves a lot of coordination. Contractors hold town hall meetings before construction begins to educate owners about the project, its schedule and what’s expected of them. They also do a pre-construction walk-through of each unit to check for any preexisting water damage and to identify which walls will be removed and how they will be replaced.The cost to complete this work is generally influenced by the size of the building, how the pipes are laid out, the number of stacks shared between units and other variables, Lecky says. Pierce estimates that a one-bedroom, one-bathroom condo can cost $17,000 to $20,000 to repipe. That means a 100-unit building with all one-bed, one-bath units might cost $1.7 million to $2 million to repipe.

Bergeman says, depending on the building’s configuration, he’s seen per-unit prices range from less than $10,000 to over $80,000, but the typical cost is $20,000 to $30,000.

You stated in your other post that you are not on the board.

In many states due delinquency is info that is covered under privacy laws. However, the owners should be notified of the collection procedures and the board should adhere to them.

Short-term thinking is common. Terms are often too short for education and action.

A higher deductible will place more of an insurance burden on the owner. When we had a $1,500 deductible many didn't insure their units. We are now up to $10,000 and most of owner's losses do not fall under the Master Policy. Saves claims and the HOA money.

Should you decide to utilize volunteer labor for occasional/minimal tasks, best to secure an HOA Worker's Compensation Policy to cover any injuries suffered while providing tasks. Even Board members walking around while performing Board duties can suffer a mishap. Our policy is $540 a year. I've broken my tailbone and twisted a bad knee just meeting a vendor while on the board. No claim, but good to be protected.

JohnC46,

Indeed, this is our problem. At least it has been recognized by some of the board members and finance committee is working with the board to find solutions.

Thank you!

ChrysB

In addition to knowing the dollar value of the delinquencies, it is or can be equally important to know what is being done to treat (collect) the past due accounts.

Does your association have a collections policy? Who is responsible for executing it. What are the results? Do changes to the process need to be made to improve the collection average? What is the past due account percentage? Any past due account is a concern, if you have fewer than five past due accounts in an association of of 191 units, you are doing well and should keep on keeping on, especially if the collection process is producing results.

If you have greater than 5% delinquent accounts, which would be about 10 accounts, I recommend a review of the past due account collection process.

My guess is collecting one past due account would increase the association revenue stream as much as many of the other suggestions which have been made, which should be explored in any case.

A HOA is a non-profit corporation. It is to collect in DUES what it spends on maintenance/operational expenses. If your HOA needs to save money it is usually in a RESERVE fund for large capital projects. It's not for savings sake. If your HOA isn't making enough money to pay it's bills, then it needs to do two things: Raise dues and/or have a special assessment. The special assessment split evenly to cover the cost of that special project.

Anything else collected by the HOA that is outside of DUES, can be considered "income" and subject to taxation. Fine are NOT a method of raising money for a HOA. It is a PUNITIVE step as if your slapping someone's hand. Filing a lien is for collection of unpaid dues. One can't foreclose based on fines.

So if your HOA isn't breaking even at the end of the year, then it's either making too much or too little. If it makes it right on time, then it's running like a smooth machine.

Sorry if I missed anything above, Chrys. It sounds like you will have an audit (vs. a review) done and that is a good thing. The firms we'v used do note if we're complying with national standards, etc. But they do not advise about reserves or about better budgeting.

I agree with all above that you rec to the Board that dues be raised. Reserves at 15% funded is deplorable. Using special assessments for big reserves replacements or repairs often places financial burdens on some owners that are really heavy.

You really must rec to the Board to hire a certified reserves analyst for a full study. This requires them to visit the condo bldg. walk around with the property manager and the onsite engineer and show the analyst every major component. The analyst will know via various sources the useful life of your components and the remaining useful life and repair and/or replacement costs.
This specialists also will compare your building exteriors and equipment you might've on your roofs to others in your area. Weather patterns & conditions are different in York than they are in Erie. Also different than Honolulu. Interior piping might be similar everywhere, but local water quality matters and your specialist will have local knowledge. If your building happens to be all brick or stone, it may be due for tuckpoinitng.

The analyst will give you financial advice about how much to contribute to reserves to get on a path to funding at a healthier rate. Our twin 25-story 20 y.o. condo buildings (200+ units) cost about $4,000 for a full study this year and is based on years of good studies, so I'm afraid if you have no studies for the specialist to review, it's gonna be pricy.

I know this might be tough to read as most here see you needing to spend money.

You still need a certified reserve specialist or analyst. A structural engineer can tell you a lot, but not the estimated remaining life of your HVAC system, or pressure relief valves and many other plumbing or mechiacal components, or how much it will cost to replace or repair them.

You still need a certified reserve specialist or analyst. A structural engineer can tell you a lot, but not the estimated remaining life of your HVAC system, or pressure relief valves and many other plumbing or mechiacal components, or how much it will cost to replace or repair them.

We are facing many of the same issues but also have a lot of retirees that want to keep dues extremely low. My battle is convincing these ppl that higher dues are needed. And we have someone running for the board that is promising lower dues.

Fines shouldn't be used as a strategy to increase revenue, however, you could include fines if you are having issues with rule enforcement.

If you have amenities, you could charge a modest fee to anyone who wants to book something like the clubhouse. You can also look at raising HOA fees/dues. This is the most reliable way to generate more money. Just make sure the increase is justified by a detailed annual budget.

I hypothesize that the more retirees a community has, the greater the probability that the reserve is significantly underfunded. Why? Because it is retirees in particular who may rail against assessment increases. Retirees will rebut the argument that the costs of infrastructure have to be spread out evenly over all the owners, and over all the years of ownership, with, "But I do not know if I will be alive ten more years. What do I care if the association special assesses everyone 12 years from now?"

If one is old and retired, and the condo buildings are not older than say ten years, it's probably a great strategy to put in place a board firmly opposed to assessment increases.

I could have predicted this. I think all the veteran HOATalk members think more in terms of the bigger picture; are community service minded (regardless of political party); feel as JohnC46 feels; and so on.

You know, Chrys? Based on 14 years of experience on the Board of my high rise and on the Board during construction defect litigation, I believe you want a good reserve study done before your Board hires a structural engineer. A reserve specialist will recommend if s/he thinks you need a structural engineer for one or more components. The analyst will even build in the estimated cost of that engineer and make it part of your reserve study.

Re: our "full" study this year, Our analyst added a reserve line item of $38,000 to have destructive testing done on areas of our 20 y.o. twin towers to determine the conditions of our piping. I think he estimates we should have this inspection done in 10 years.

MarshallT,

Great points!
Thank you!

KerryL1,

Thank you!!