How to Get Finances for an HOA Exterior Maintenance Project
Is your HOA community overdue for some exterior maintenance?
The truth is that when it comes to repairs or capital improvements for HOA associations, the cost can add up quickly, depending on what is needed. There should be a build-up for the funding required in most situations, but if the price is higher than the reserves, there may be a question about how to pay for the upgrades.
This can be problematic, because a choice will have to be made between what's necessary and what can help improve the living area for the tenants. Fortunately, there are a few ways to make the HOA maintenance more manageable.
Let our HOA Capital experts explain how to get finances for an exterior maintenance project.
Weighing Out the Need
One of the first considerations is the priority of areas that need improvement. Knowing the difference between what's considered a maintenance expense versus a capital improvement is essential when you decide to apply for a loan.
Examples of repairs or maintenance can include:
- Replacing old pipes in a bathroom
- Putting new sprinkler heads in your irrigation system
- Applying sealant to a leaky roof
- HVAC services
Projects that would fall under an exterior capital improvement category are:
- Installing solar panels
- Investing in a smart irrigation system for water-saving features
- Resurfacing an established road
- Adding accessibility ramps in common areas
- Installing energy efficient doors or windows
A new roof will take precedence over replacing areas in a playground, so having a list of all the required upgrades can help keep the need clearer, allowing the tasks to be completed over time instead of once.
Ensuring that dues are being paid on time, keeping a regular budget that includes reserve funds, and forecasting possible future expenses can also help when it comes to financing.
Understanding what is available for upgrades can help sustain any reserves through the year unless it comes to a significant repair that may require some additional outside assistance when it comes to funding.
HOA Finance Options
Traditionally HOA dues would cover any upgrades or repairs that need completing. But if the budget is not allowing for additional funding of projects on the property, the group may need to consider taking an HOA loan to help supplement the missing finances.
Even with the monthly revenue from HOA dues, if the money is not appropriately balanced throughout the year, it can run out quickly with just one or two major repairs.
The primary concern is ensuring that whatever needs upgrading will be considered an HOA capital improvement for the community. This can improve the overall well-being of the individuals living there and increase the property's value.
Getting an HOA loan can help with capital improvements and emergency repairs required to be fixed by the organization.
There is also the option of having a special assessment of what is needed. The evaluation may create additional fees for those in the community to help finance the repair, but it may be an agreed-upon project depending on the situation.
Traditional Steps for an HOA Loan
If you have decided an HOA loan is right for your association, the first recommendation is to look at the governing documents. These will specify the legal requirements involved if there is an intention to pursue a loan and discuss the process with the members of the association.
You will also have specific information required for the lender, including:
- Any liquidity associated with the property
- How many units are on the property, and what percentage are owner-occupied
- If there are any delinquencies and how much money is owed
- If assessments will need to be put in place to repay the financing
Depending on state regulations, the loan process can take up to six months, and various factors will impact how fast the process goes.
Common factors that affect the loan process are:
- Needing membership approval
- If special assessments need to be assigned
- Lender approvals
- Governing document requirements
Once the documents and the lender requests have been fulfilled, you will also need to state where the funds are going to help with distribution.
Upon completion of all requirements, the contract can then be assigned and the loan finalized.
HOA Capital Works as a Team With Your HOA
HOA Capital is a locally owned company committed to creating the highest quality living environment for all our client's residents. We offer HOA management solutions that can better streamline the property's needs to help our customers with the process.
We are here to help, so if you would like to schedule an appointment, contact us online, or give us a call at 952-836-9593 today.