5 Common Budgeting Mistakes HOAs Make and How To Avoid Them

Budgeting is one of the most important aspects of running a successful HOA (Homeowners’ Association). Unfortunately, it’s also one of the most difficult. There are a lot of moving parts, and it can be easy to make mistakes, and those mistakes can translate to severe consequences that can be hard to recover from.

So, are you looking to avoid or even address mistakes that HOAs make with budgeting? If so, it is vital to know what those mistakes are in the first place. To help you out, we want to share with you a couple of common budgeting mistakes HOAs make and how to avoid them:

Mistake 1. Not Having a Reserve Fund

One of the most common budgeting mistakes HOAs make is not setting aside money in a reserve fund. A reserve fund is essential for unexpected repairs and maintenance costs. Without one, your HOA could be forced to raise dues or take out a loan to cover these expenses.

To avoid this, make sure to include a line item for a reserve fund in your budget. Aim to set aside at least 10% of your total annual budget in the reserve fund.

Mistake 2. Underestimating Maintenance Costs

Another common mistake is underestimating the costs of maintenance and repairs. These costs can fluctuate year to year, and it’s important to have a buffer in your budget to account for them.

To avoid this, work with your HOA’s maintenance team to get an estimate of expected costs for the upcoming year. Add a cushion to this number to account for any unexpected expenses.

Mistake 3. Failing to Account for Inflation

Inflation is another factor that can have a big impact on your HOA’s budget. Costs for goods and services tend to go up over time, so it’s important to account for this in your budget.

To avoid this, include a line item for inflation in your budget. A good rule of thumb is to budget for a 3% increase in costs each year.

Mistake 4. Not Reviewing the Budget Regularly

Another mistake HOAs make is failing to review the budget on a regular basis. This can lead to big problems down the road if costs have changed and the budget hasn’t been updated to reflect this.

To avoid this, make sure to review your HOA’s budget at least once a year. This will allow you to make any necessary adjustments and keep your HOA on track.

Mistake 5. Not Getting Resident Input

Another common mistake is not getting input from residents when creating the budget. This can lead to problems down the road if residents feel like they’re not being represented in the budget.

To avoid this, you should do your best to talk with the residents of the community. Ask them what ideas they may have and what they commonly wish they got to work with. Such insights can help you better plan your budget and keep everyone happy.


By no means is budgeting for HOAs easy. There are a lot of challenges to be met, but this also doesn’t mean it is impossible to get it right. By knowing the common mistakes that are made during the budgeting process, you stand a far better chance of setting a budget that makes sense and works for everyone. This can help transform the community into a much better place and also ensures that the community’s financial needs are thoroughly met.

California Builder Services helps HOAs meet various needs, from budgeting to reserve studies and more. If you are looking for California HOA budgeting services, work with us today!

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