Many modern, planned housing developments and condominium complexes utilize HOA fees.

These fees are used to cover a variety of shared expenses within a community. While some homeowners may balk at the monthly costs, they come in exchange for some benefits that can help make your neighborhood more beautiful, comfortable, safe, and enjoyable.

HOA fees can also help to increase property values and attract more responsible homeowners.

If you’re in the process of determining and setting HOA fees for your community, keep reading. We’re covering what you need to know to set your fees appropriately.

Start By Calculating Your Costs

The first thing you need to do when figuring out how to calculate HOA fees is to determine what your community’s costs are. This includes any shared expenses that benefit all homeowners in a community.

Trash Removal

Trash removal is an expense that all homeowners pay, whether they realize it or not. In a community without HOA fees, homeowners pay this fee directly to the trash collecting service.

But some communities opt to pay this fee for the entire community and then pass it along to homeowners via the HOA fee. This is a common practice for communities and condo complexes with dumpsters. Figure out what your community or complex is paying for trash removal, and divide that number among the number of homes or properties in the community.

Landscaping and Outdoor Areas

One of the most important roles of an HOA is to keep the community beautiful. Landscaping and maintaining outdoor areas are a big part of this.

Whether your community features a large outdoor space like a park or just simple roadside green spaces, make sure that you’re calculating all costs associated with maintaining those. This includes mowing costs, seasonal planting, watering, and any maintenance to curbs, planters, fountains, and other accents.

Security

If your community has a security guard or security cameras used to keep residents safe, the costs associated with these should certainly be included in your HOA fees.

Common Areas

Most condo complexes have a lobby and other common areas. A housing complex may have a clubhouse. The cost of maintaining this, electricity, and water in any facilities within, and any staff that these areas employ should all be included in your HOA fees. These will likely make up a significant portion of your fees.

Amenities

Another big benefit of communities with an HOA is that many offer amenities that other neighborhoods lack. From pools to tennis courts to fitness facilities, any and all costs associated with these will be divided among homeowners in the HOA fees.

If you plan to add additional facilities in the future or upgrade your current ones, you’ll also want to calculate what this will cost. Then, divide it up by the number of homeowners as well as how many months away your planned remodel or construction project is. This will help break up the cost while still allowing you to make your improvements.

Streets

If the streets that make up your neighborhood are private, the community will likely be responsible for maintaining them. This includes paving them, fixing any potholes, and maintaining storm drains. These costs can add up fast, especially in a large complex.

This is one big area where a reserve will come in handy (more on that later).

Insurance

If your community has common areas, facilities like a pool or fitness center, or any other shared spaces, you’ll need insurance to protect them and protect your residents. The cost of this insurance will be passed along to homeowners via HOA fees.

Reserves

In addition to paying for any immediate expenses, your HOA fees should also include at least a small amount that will go into a savings reserve. This reserve can be used in the future to cover any emergency expenses, like road repairs, or to fix damage to your facilities.

Understand What Homeowners Expect

Around 24 percent of all homes in the U.S. are part of a Homeowner’s Association. These homeowners pay anywhere from $100 to $700 on HOA fees, with the average falling around $200.

When setting HOA fees, it’s important to consider what is reasonable for homeowners to pay. While it may be tempting to set your fees high in order to build up a reserve that you can use for improvements, keep in mind that homeowners have other bills to pay as well, including their mortgage and utilities.

It may help to research other communities in your area with an HOA and use their fees to determine what is typical for the local market.

Decide Between Monthly or Annual Fees

Another element we need to cover in this HOA fee setting guide is whether or not you’ll charge HOA fees by the month or annually. In most cases, HOAs opt to charge monthly fees. 

This helps to lower the cost to homeowners. This may also allow you to charge homeowners slightly more in order to line your reserve.

If you’re in the process of changing HOA fees for a community or charging fees where they previously did not exist, you may want to allow your homeowners to vote on whether they’d prefer to pay monthly or annually.

Setting Your HOA Fees 

Setting HOA fees takes some careful consideration and calculations. But by considering all of the costs of maintaining your community and any facilities, and considering the local market, you can set your fees fairly, and in a way that allows you to properly maintain your community.

Now that you know how to set your HOA fees, let’s take a look at why these fees are so vital. Check out this blog next to learn more.

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