Important HOA Financial Management Tips for Funding HOA Reserve Components
Aurora, CO, HOAs are responsible for managing the day-to-day operations and long-term financial health of their community. This includes maintaining and improving the common areas and amenities for the benefit of all residents.
To do this, community associations must carefully budget and allocate funds for various important expenses, including reserve components. If you’re an HOA board member looking to learn more about reserve components, keep reading to learn everything you need to know about HOA reserve components and important financial management tips for funding them.
What Are Reserve Components?
Reserve components are generally considered to be any significant, long-term improvement or new addition to your HOA budgeted for in your association’s reserve study. A general rule of thumb is that a community improvement is one that has a lifespan of more than a year and will add value to the property.
Examples of reserve components include the building of new structures or amenities. This can be something as small as a mailbox or as large as a new building or community swimming pool. Reserve components can also refer to significant upgrades and repairs of existing structures, such as upgrades that enhance community safety.
Why Do You Need to Fund Reserve Components?
Community improvements are an inevitable aspect of HOA management. As time progresses, your common areas and amenities will wear down or become outdated and need significant repairs or replacement. This is true even if you’re performing yearly maintenance or minor repairs along the way.
This is a crucial aspect of maintaining long-term community well-being and resident satisfaction. Therefore, having a well-managed and adequately funded community association is of the utmost importance. By understanding the difference between routine maintenance costs and capital improvement expenses — and why the latter are required — HOAs can effectively organize their finances to ensure the continual enhancement of their communities, securing their long-term success.
What Are the Benefits of Funding HOA Reserve Components?
When properly executed, reserve components do more than just enhance resident satisfaction. They can also help increase property values and even decrease long-term costs.
When you invest in upgraded amenities or structures using capital improvement funds, you can potentially decrease monthly maintenance and utility expenses. For example, you can increase the energy efficiency of your buildings by installing eco-friendly upgrades, thereby reducing monthly bills.
Investing in these modern upgrades and new amenities also increases the value of your HOA and its properties. By investing in infrastructure and making your neighborhood a more pleasant and desirable place to live, property values will increase and your community association can entice new homeowners, increasing your overall profitability — and boosting resident satisfaction.
If your Aurora, CO community association could benefit from professional community management services, including financial management services, consider the industry-leading experts at The Management Trust. Our HOA financial management services are not only included as part of our full-service community management program, but they’re also offered independently to community associations requiring only HOA financial management. All of our financial operations are SSAE 116 compliant and are highlighted by our TrustLink proprietary software. To learn more about how The Management Trust can help your community thrive, give us a call at 303-750-0994 or fill out our online contact form today.
