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Subject: Financial Ratios - Benchmarks
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Author Messages
TimB1
(Arizona)

Posts:4


07/07/2006 12:25 PM  
Are there financial ratios or benchmark data to compare the balance sheet and income/expense statement of an HOA to see if the HOA is in good financial health?
RogerB
(Colorado)

Posts:5067


07/07/2006 12:55 PM  
Tim, to determine if an HOA is in good financial health I look at a 20 year reserve plan for capitol expenditures, the current reserve funds, and how soon the annual assessment will need to be raised. If the 20 year capitol budget indicates the annual assessment does not need to be raised for 10 or more years the financial health is good IMHO.
GeraldT1


Posts:0


07/07/2006 12:59 PM  
TimB1,

It would be hard to provide a general ratio that may apply to your HOA. Certainly the expenses should not exceed the income generated from monthly maintenance. However, the amount of money in an HOA's reserve account is where your interest can focus. But this analysis requires a more extensive knowledge of the elements that need to be replaced, when they need to be replaced, and the cost of replacement. For example, if you have rooftops or roadways that will cost $300,000.00 to replace or re-pave, and at the time of replacement there will only be $150,000.00 in reserves then the difference will need to be made up in a special assessment.

The following link has some useful information regarding reserve studies:
http://www.dfwcai.org/hoa/assn247/documents/ReserveStudies.pdf

Read Case Study #3 to see what can occur from inadequately funding the HOA accounts.

Best of luck!!
GeraldT1
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Forums > Homeowner Association > HOA Discussions > Financial Ratios - Benchmarks



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