HOA boards often hire outside companies to handle the neighborhood’s HOA management needs without understanding the costs and benefits of such a partnership. For instance, an HOA board may believe they need a third-party HOA property manager to avoid potential risks and have a more “professional” approach to please current and prospective homeowners. They may also believe self-management is too difficult and too much of a liability.
Yet, an outside property manager is a major investment and has a significant impact on your annual budget. These services can cost tens of thousand dollars each year in unit fees. Not only that, a management company may charge for other expenses that can add up throughout the year, such as initiation and exit fees, per instance fees like collections, and more.
Despite the cost of third-party management, your board of directors may still be hesitant to self-manage your community. Risk, transparency, and workload are all major concerns that likely weigh on this decision.
While an outside management company may relieve your HOA board of some managerial burdens, it may create others. It’s important to consider if the return on your investment is worth it.
Most neighborhoods are fully capable of handling the challenges of HOA management with homeowner volunteers, especially with the right tools and approach.
Table of Contents
- Cost of an HOA Management Company vs. Self-Management
- HOA Self-Management Challenges
- How Can HOA Management Software Help?
Cost of Hiring an HOA Management Company
The cost of hiring a management company can quickly add up to a substantial chunk of a community’s budget. While property managers may offer a host of services to keep a neighborhood running, it’s worthwhile to perform a cost-benefit analysis of whether outsourcing these tasks is really worth the price point.
Although fee structures may differ based on what a company offers, here are some of the typical costs of hiring a third-party manager:
When a management company takes control of an HOA’s financial and community management records, it charges the HOA a fee to onboard the HOA’s files, bank account management, accounting adjustments, and more. Depending on the size of your community, these fees alone can be thousands if not tens of thousands of dollars.
After onboarding, an outside management company will charge a monthly flat fee based on the number of units in your community. The average fee usually falls between $20 and $50 per unit, but some companies charge much higher fees, especially in wealthier areas. There are many factors at play, including cost of living, property management laws in your state or region.
Unit fees add up. At $20 per unit, a 50-unit community would pay over $12,000 per year.
If you choose to work with an HOA management company, make sure your HOA board reads the contract carefully to understand what duties are included in this fee and which activities will cost extra. Some companies charge to send a violation notice, process late payments, attend board meetings, and other routine HOA tasks.
If your property management company turns out to be a bad fit for your community, terminating this contract comes at a cost, especially if you end the contract early. Exit fees account for the work required for transitioning your accounting, banking and other records back into your HOA board’s control.
In the event of a terminated contract, your outside management company may be slow to relinquish your information. Especially if your bookkeeping was disorganized when your HOA handed it over to your HOA management company, it can be difficult to know who owns what data and how to get it back.
In addition, your management company may have a termination fee or even keep you on the hook for fees for the remainder of the contract. Add on the cost of onboarding a new manager, and this can quickly become a budget pain point.
Cost of Self-Management
Aside from the standard fees a management company charges, there may be other costs within your contract, such as for processing architectural reviews, storing your documents, printing and sending notices and newsletters, and more. Adding up all these costs, you might reasonably conclude: Why pay for these services in the first place, when we can do it ourselves? When you self-manage your community with the right tools, such as HOA accounting software, you pay nothing except day-to-day operational costs.
You may incur costs such as retaining a lawyer for maintaining compliance, hiring a CPA for financial audits and tax filing, or consulting other professionals. Yet the savings from self-management can be invested into other important community upgrades and needs, adding value without breaking the bank.
HOA Self-Management Challenges
Some HOAs may be hesitant at first about self-management.
It may seem like a major task to undertake everything from bookkeeping and accounting to managing maintenance, dues and fees collections, vendor contracts, and effective communications with homeowners—not to mention important responsibilities selecting and maintaining proper insurance coverage, transparent and effective budgeting, and being “the bad guy” when it comes to enforcing community rules.
Other than workload and accountability to homeowners, some challenges to self-management include maintaining legal compliance, avoiding liability lawsuits, and protecting property values.
Yet, volunteer managers are more than capable of facilitating a prosperous self-managed community and providing the value homeowners expect. In fact, volunteers have the added benefit of being more invested in the community’s success and increasing property values than a third-party.
How Can HOA Management Software Help?
The right HOA management software will offer volunteer managers the tools they need to efficiently and effectively maintain their communities.
An HOA software platform can automate and streamline an association’s budgeting and accounting. HOA accounting software is built to specifically empower HOA management objectives, serving as your all-in-one tool to run your HOA smoothly and increase satisfaction with homeowners.
Here are a few of the crucial ways HOA software can give your volunteer managers the tools they need and provide value to homeowners:
- Software can cost as little as $40 and may offer a free 30-day trial to ensure it fits your needs.
- Uniquely designed for bulk billing, HOA software allows scheduled invoicing of all units in your community.
- Robust accounting tools include online dues collection, bank ledger syncing, budgeting templates and automation, and real-time custom reporting for financial transparency.
- Manage units, vendors, and residents in a cloud-based repository, and easily search and access all data and communications records.
- Track maintenance requests and violations.
- Homeowners can make digital payments, send requests, view documents and payment history, and view a community calendar through a unique resident portal.
- Build a custom, fully-integrated website for your community.
- Communicate through multiple channels, such as mass text, email, telephone messaging, community polling, and even mailing printed invoices and newsletters.
- Enforce rules with automated, anonymous violation tracking, avoiding conflicts between homeowners.
Every community is different. Whether you choose to self-manage your HOA or hire a third party, you should be clear about knowing what you’re signing up for. That’s why we offer a free 30-day trial. At PayHOA, our software gives you the power to manage your HOA smoothly and our expert support team loves helping our customers find unique solutions to their unique challenges at no extra cost.