You are in the office and the telephone rings. The voice on the other end asks, “What would you charge to manage a 151+ unit HOA? We need a ballpark figure so we can talk it over with the other members of the board.”
Most HOA community managers have received calls such as these. The caller assumes that association management can be priced like eggs in the supermarket, and he is shopping around to find out where eggs are the cheapest. Some managers, anxious to get what business they can, are quick to respond without knowing anything about the property in question. They answer with a standard price-per-door.
“We’ll charge you $10 per unit per month.”. What these managers may not realize is that such a figure may bear no relation to what the actual cost of management may be, and the figure may result in unfair discrepancies to the association and/or management. In fact, $10 per door may be too high for the services required or for what the association can afford with the current budget.
I will discuss a method of pricing your HOA management services that covers your costs for services required and a reasonable profit to the HOA management company.
Let’s begin with costs. Before you do anything else, you must find out what your required management services are costing in man-hours. How many man-hours does it take to deliver the required services that our association is demanding? Time is money, a commodity that you even sell to your employer. Every business must look at cost, and, in the management service business, time (service hours) is all that are sold.
Community Manager’s Services
Inspections, site visits, capital improvement supervision. board meetings, travel time, office hours per month, travel expenses, and office supplies.
Executive Services
Board meetings, site visits, management survey, inspections and specifications writing, monthly accounting review, budget preparation, travel time, and travel expense.
Accounting and Clerical Services
Receipts accounted for monthly; disbursements (invoices, payments), monthly account report, association member statement and preparation, statement duplication, board consultation, cost of advance personal funds.
All these items must be considered in determining your HOA management services costs. Some association managers, when they see this list, are amazed at the amount of work they do. It all takes time, and time is money, which must be accounted for. As a board member, remember that not all associations require the same level of management services and not all management companies provide the same level of service.
The cost of management is not minimized because of the size of the Homeowners Association (HOA). Functions of a manager for HOA are driven by the cost of manpower and not the size of the community.
Manager Cost Per Hour (2002)
$57,765 cost to employer
$57,795/year – 2,086 hours/year = $27.69 per hour cost
This per-hour cost does not include overhead and profit. Management will need to use an overhead and profit factor of 3 times the hourly cost, which in this example is $83.07 per hour.
The same formula is used on all in-house management team staff to arrive at man-hour cost prior to determining the management fee. The total of all man-hour wages multiplied by the (3 times factor) makes up the management fee. You are used to seeing services billed the way for your association. Lawyers and Certified Public Accountants charge and bill in this manner for services rendered for actual time spent.
The difference between professional association managers and the two preceding professionals is that managers must estimate in advance (based on sometimes sketchy information) the amount of time that is going to be invested in a business management relationship.
Remember, the more services wanted means more time. Be careful and realistic in your requirements for there are hazards in taking the low bid and may be many bumps in the road.