Every HOA is different - they have different needs, sizes, and common elements. There is no ideal dollar amount that applies to all homeowners associations. And without a sufficient reserve fund, the community won’t be able to pursue projects that lead to scalability and growth. Without the latter, the community would not be able to operate properly on a daily basis. Ideally, HOAs should have about 1 to 3 months’ worth of operating funds in their account.īoth reserve funds and operating funds are important to an association. Reserve funds and operating funds are usually respectively kept in a savings account and a checking account. This would include maintenance services, security, landscaping, utilities, management fees, taxes, and insurance. Meanwhile, an operating fund is used to pay for the day-to-day expenses of the community. Most associations have two accounts: reserve funds and operating funds.Īs previously defined, homeowners association reserve funds are designated for major replacements, repairs, and maintenance. You should also know why these accounts are important to your association. How Do Reserve Funds Differ from Operating Funds?īefore discussing ways to protect your association’s finances, it’s important to know the difference between operating funds vs reserve funds.
So, instead, the HOA will allocate money in their reserve account for a period of time - or until the project needs to be paid off.
Since these are quite expensive projects, it would be difficult for an association to pay them off in a lump sum. Construction of a new swimming pool, a major roof repair, and hurricane damage are all projects that will be covered by the HOA’s reserve fund.
What can HOA reserve funds be used for? The HOA reserves are used to fund future projects, large-scale repairs, and unexpected expenses.
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