More and more associations are collecting less and less dues as a result of the housing crisis. Here are four tips for trimming your budget to ensure that your association still provides key services with a smaller pool of funds.
1) Shop around. A good way to shrink your budget is to shop your insurance policies and other ongoing contracts around. If you’ve been with your current insurance carrier for years, it may have been a while since you’ve compared rates. Do it now. While you’re doing that, ask whether increasing your deductibles will net a worthwhile savings. Sometimes the savings are minimal—and probably not worth the added risk. But you’ll only learn that if you ask.
2) Conserve energy. Minor conservation efforts can make a big difference in your budget. If you’ve got timer-controlled sprinklers that run for 30 minutes each morning, cut them back to 25 minutes for a month to see if the plants still get enough water and you save any money on your water bill. Do the same with your hot water heater. Dropping the thermostat a degree or two may make no difference to residents, but it will create savings. Finally, depending on the size of your association, swapping old-fashioned light bulbs out for more efficient compact fluorescent bulbs can save money. Compact fluorescents aren’t inexpensive, so you’ll take an initial budget hit. But you’ll see lower energy costs over time.
3) Do it yourself. If your association is in dire straits, evaluate all your expenses to determine if you can bring any functions in house. If you have a management company, is it possible to eliminate that expense and run the association yourself? (The opposite may also be true. If you’re self-managed, you may save money by having professionals keep an eye on your budget and get you discounts from their trusted vendors.) If you have landscapers, can you cut back on their work and let residents pick up the slack? You could pay for a spring and fall grounds cleanup while bringing grass cutting and flower planting in house. Finally, explain the situation to homeowners and ask owners who are professionals for discounts or freebies. For example, if you have a resident accountant, ask if she’ll prepare the association’s annual tax filing for free or at a discounted rate.
4) Fix it now. Homes are like cars. Routine maintenance helps prevent larger, more expensive problems from creeping up on you. Create a checklist of your major mechanical and building systems. Then ask residents with expertise or outside contractors to check those systems to see if a minor upgrade or repair now will extend the life of the system. For example, if you’ve got a roofer in the house, ask if he’ll volunteer to inspect the roof and do minor patching on areas that may become a problem in the near future.
If your budget is still in the red after all of your trimming efforts, you may have to take more drastic measures—like raising assessments. Before you do, however, consider whether you can generate income. For example, your governing documents may permit you to rent your clubhouse to nonresidents for a fee. Or if your state allows you to earn money on reserves (some don’t), consider putting a lump sum that you don’t expect to use immediately in a safe investment with a higher return than a savings account.