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How Do HOA Management Companies Make Money?

A homeowners’ association (HOA) management company is tasked with the management of the day-to-day operations of an association.

Volunteer board members have their lives to live and barely have the time and expertise to invest in the self-management of the HOA.

As such, you will find that the board of directors makes the decisions, while the management company is tasked with implementing its vision. HOA management companies make money by charging fees to the homeowners or the HOA itself.

These fees are meant to cover services such as administrative tasks, property maintenance, financial management, and on many other occasions, additional services demanded by the community.

Aside from that, note that they can also earn money via additional charges for precise projects or services beyond the basic management fee.

Ways HOA Management Companies Make Money

  1. Service Fees

These fees are more or less charged to the homeowners or the HOA itself and are meant to cover a vast array of essential services.

Most often, this will include things like administrative tasks that encompass handling correspondence, arranging meetings, as well as managing records.

Property maintenance, which will necessitate landscaping, repairs, as well upkeep of common areas, is another service that falls under these fees too.

  1. Financial Management

Depending on the agreement they have in place with homeowners or the board, they might as well be tasked with handling the association’s finances, and this will often include collecting dues, managing budgets, paying bills, as well as maintaining financial records.

You will find that many HOA management companies tend to bill additional fees for financial services aside from the standard management fee.

  1. Special Projects and Additional Services

In a good number of cases, HOA management companies can be asked to carry out special projects or make available additional services that are outside of their regular scope.

These can include things like organizing community events, handling and coordinating major renovations, or even construction projects within the community.

Note that for these additional tasks, these management companies might bill extra fees or receive a percentage of the project’s cost.

  1. Consultation and Expertise

Homeowners’ association (HOA) management companies are tasked with the management of the day-to-day operations of an association.

These companies are made up of professionals who are experts in the field and as such they can offer additional professional services to clients.

Keep in mind that these companies can offer consultation and expertise in legal matters, compliance issues, or comprehensive planning for the community.

It is also not foreign for these companies to charge for specialized advice or services that have to do with legal compliance, governance, or long-term planning.

  1. Vendor Relationships and Commissions

Owing to their expertise and connection in managing properties and many other real estate projects, you will find that these companies often establish relationships with a wide range of vendors for services like landscaping, maintenance, repairs, and insurance.

In numerous instances, reports have shown that some of these companies tend to get or receive commissions or discounts from these vendors, and this can contribute to their overall revenue.

  1. Investment Income

Although this will most often vary depending on the terms of their agreement with the HOA, keep in mind that a good number of management companies tend to handle the association’s reserve funds or investments. In these situations, they could earn a percentage of the interest or returns generated by these funds.

  1. Fee Structures

Note that the list above is not comprehensive enough to include the various ways these businesses make money in this modern age. One of the first things you need to know is that fee structures can vary widely among HOA management companies.

It is possible for some to bill a flat monthly fee, a percentage of the association’s budget, or a combination of both. Extra charges for particular demands or special services or projects could also be charged separately.