Calculating HOA/Property Management into a Proforma

When you start to run the numbers on a build-to-rent investment opportunity, it can be tricky work accurately factoring in property management fees and HOA expenses. Here's a taste of how we do it in some of our rental investments and what to look out for. 

Watch the full episode: https://youtu.be/fK0u_k4OeTA

Steve Olson: We'll have Tom come on the show one of these days and talk about hos and some of those complexities. But when you have an HOA involved, you're essentially you're moving light items around on your proforma, right.

Things that you would normally budget for, like most of your insurance and maintenance and things like that are separate line items. And they mostly disappear and they get shifted into an HOA line item. It's the same effect on the numbers, but the control is different.

So when we talk about community management going away from fractionalized to, to uniform, right. It's different because in this case, the property manager is the boss across the board. 

Are they not? Yeah. Yeah. They're the ones calling the shots. So the property manager and how they get paid, typically the larger the community, the lower the management fee, but then you also have payroll, so you're going to have an onsite manager that you're paying. And they're the ones that people come to. 

My toilet's broken, right? And they're getting paid I'll oftentimes and reduced rent and then a small salary to live there and to be the boss, to be the sheriff of that community. And then beyond that, you've got your, your advertising costs and things. This world of management and HOA comes much more together because it's one onsite community manager. 

Sherida Zenger: And I think that's another thing to double-check because in. Um, ma HOA and property management are separate. They do work hand in hand, but there are a lot of times that people will say, oh, shouldn't that be the same line by line item? And I think it's because they think that property management and. HOA is the same thing, but ours are broken out. 

Double-check. If it's a, if it's one whole community it's usually together and  

Steve Olson: it's all in how the ownership of the community is, is held really that, that is the determining factor. Have you could have a situation where an entire community is in a master-planned development that has that subject to a development agreement where you have one property manager and the entire thing is subject to. 

That could happen as well. Okay. Well, um, this is kind of HOA is kind of like a topic like insurance. You can only talk about it for so long before you're done, but it's important. You have to pay attention. Any last words on HOA and community management.  

Chase Leavitt: Yeah. Don't be afraid when you see it. Don't throw up your hands. Just understand it. Look into it a little bit further. Understand what you're getting into.  

Steve Olson: And we'll get into another episode in the future with more specifics like I've got a bunch of loose ends that I'm working on I'm on an HOA board as well. And some of the things that we've noticed are helpful in community management.