The Byzantine World of HOAs and Their Management

☼ A question was posed to me via email about how much money could be made by being the manager of the Ponte Vista HOA. The writer also gave the example of a relative who had been assessed a "Special Assessment" for re-roofing the building. The second part of the question was whether all units would pay the same.

Much of this is murky because it will not be absolutely determined until the project is finished and turned over to the HOA.

I do not live in a condo, but I have in the past and I've owned some investment properties which were condos. My answers are based on personal experience and might not be complete. I might get some stuff wrong, so I would appreciate any assistance in corrections and fine-tuning.

☼ Let me start with the "easy" answer first. Any HOA which has to go out with a "Special Assessment" for regular maintenance such as roof repair, dropped the ball. This should have been calculated into the monthly fee. This type of problem is usually symptomatic of smaller associations who try to do it themselves. State law requires they keep a reserve for this type of thing. But when you have the owners trying to do things themselves without professional assistance, they often overlook obvious potential problems. The state also requires a reserve for calamitous events. In all fairness, with people being late on the HOA dues, or bringing the funding back up after a major expenditure, etc. maintaining these separate reserves can be difficult. But that IS what the management company gets paid for.

☼ The more common way in which HOA fees are currently calculated is a base, plus additional for the size of your unit. Bigger units take more maintenance for certain items. So someone who owns a little loft will not be paying as much as someone with a 3-bedroom.

While it seems like a large amount of money being collected, all of it is being paid out for maintenance, and (hopefully) to maintain the mandated reserves. (Oh, by-the-way, the developer is obligated to turn over the project to the HOA with all reserves funded.) So even though it's a bunch of money, it is not going in the manager's pocket. HOA managers are like any other property manager in that they work on a percentage of fees collected. For large complexes it hovers around 5%, although if the association is tough they can negotiate that down. For smaller complexes it can be as high as 10%.

☼ The other thing to remember is that Ponte Vista will not be 2,300 units. I have not supported that many units from the beginning. And as Mark Wells pointed out in his blog, Bisno Development said they are presenting a new proposal on June 18. Some people feel they could present an even bigger project, but I think they are going to come in with a lower number.

This is good. Less units means more area for green space/parks, or adding more retail. I'm looking forward to hearing what they have to say.

I was heartened to hear that it was expressed that there might be some meetings AFTER the presentation in which the CAC will try to reconcile the new proposal with what they have recommended so far.

☼ Regarding "glorified garages" and units of 600-700 sq.ft.. I have to admit I am expressing personal opinion here. There are reasons to buy an existing home, and there are reasons to buy new construction. Personally I would not want to deal with the problems inherent in a 25-30 building. I've had to deal with them before in some of my investment properties. They turn out to be money-pits. But if you have the time and desire to work on fixing the place up, they can be worthwhile. But they are still not cheap. $400,000 for a fixer-upper is not in the same league as new construction.

☼ While people talk about the average price at Ponte Vista, they should be talking about the median price. Straight averages are not an accurate representation. Medians are. If you look at any real estate articles, they always talk about the median price.

However, neither average, nor median prices can be calculated until we know how many units, how many bedrooms, and projected sales prices. Hopefully this will be presented at the June 18 CAC meeting.

☼ The last item is Miraleste Canyon Estates. Thanks Mark for the contribution. The high percentage of renters in that complex definitely keeps the property values down. In addition it is '70 chic. All the floorplans are just about identical and they are just boxes set next to each other. I would live there as a renter, or perhaps as a starter home, but that's about it. Because of the depressed market values, you are just not going to get the price appreciation you would in a different location.

I hope this brings up more items for us to discuss and make suggestions about.

Tom Field