How to decide how much to increase reserves yearly?

Started by CourtneyN • 1 replies • 1162 views

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CourtneyN (Oregon)
Posts: 4

Posted:

I was wondering if there is a standard amount (% per year) that HOA's increase the dues to be able to increase the reserves amount, in order to account for inflation? That is, when you are creating a 2009 expected budget (based off of the previous years expenses) should you increase the amount/percentage of dues that goes into the reserves to accomodate for inflation?
Thanks for any help.

KirkW1 (Texas)
Posts: 1,665

Posted:

First, all HOAs should have a reserve study. This will tell you where you are on reserves and recommend a funding plan for the reserve account. Best practice is to update the study every year, though having an inspection every year can et expensive. At any rate, you should at least do a self update every year and get a professional opinion on a regular basis.

The reserve plan should take into account inflation though of course they have to guess what the inflation rate is. It should be noted that construction costs do not strictly follow the Consumer Price Index.

I don't think it is right to assume that you need to raise your dues every year, or that you should not raise your dues every year. Dues should be driven by budget. But you do have the right idea that you must adjust the amount required in reserves in accordance to the actual expected costs.

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