Inflation. We’ve all heard the word, and frankly, we’re all probably sick of hearing it. The reality is that many associations may feel the impact of this current inflationary period, regardless of when it lets up, for years to come. Part of what makes this particular period of inflation so impactful is that prior to March 2020, we experienced a fairly unprecedented level of inflationary stability ranging from 3-5% each year.
When conducting a reserve study, one of the first steps your consultant will take is evaluating the inventory of your community’s components and classifying them into groups, with reserve studies focusing most prominently on reserve components. However, long-lived assets are equally as important to keep an eye on.
As you know, dues and special assessments come with the territory of residing in any type of community association. Understandably, it can be confusing for boards and residents to navigate exactly what both of these payments are used for, when they should be used, and how they affect the association as a whole.
As we all know by now, inflation has moved into our lives and isn’t estimated to move out for about a year or more. While some industries are already seeing some relief, this is not and will not be the case for many other industries for the foreseeable future, including those that community associations rely on for capital projects.
With the budget season fast approaching, it’s time to seriously consider your association’s near and long-term financial needs, goals, and ultimately, its future. Capital planning is no easy feat, but having a continuous blueprint for the future is the key to a thriving community.
When it comes to reserve funds, a common question we hear is “how much money should our HOA have in reserves?” The truth of the matter is, it depends. Each association is unique in a variety of ways, so the answer to this question varies widely depending on the community, its components, and its wants and needs.
When it comes to financing capital replacement projects, there are several funding options available to associations. Ideally, an association will have enough in reserves to complete the project in a timely manner, but there are other options accessible if this is not the case.
Supply Chain Issues and Rising Costs – Best Practices for Addressing Your Community’s Capital Planning Needs
We are often asked, “how can my association account for supply chain issues and rising costs when addressing our capital planning needs?” Unfortunately, this question often times arises when a community is in the thick of addressing urgent capital projects.
Arbitrary percent funded values do not provide a complete measure of the health of your reserve funds. Threshold funding provides a clear understanding of financial health.
Are your reserves fully funded? It’s a great question, but at the risk of making this sound like a legal blog, it depends. In order to answer the question accurately, we first have to define the term fully funded.