It can be confusing for homeowners to differentiate between capital improvements, maintenance and repairs when it comes to their monthly association dues. To ensure complete understanding of where your payment goes each month, let’s take a closer look at what exactly constitutes as a capital improvement.
In This Article:
What is a Capital Improvement?
Capital Improvements vs Maintenance Expenses
How Can Capital Improvements Benefit Your HOA?
Funding Capital Improvements: Where does the money come from?
What is a Capital Improvement?
A capital improvement is any asset that adds value or prolongs the useful life of a property. Examples of capital improvements include additions or renovations to existing buildings such as new windows & insulation as well as upgrades to infrastructure. These types of improvements increase the overall value of a property over time. It’s important to note that this definition does not include regular maintenance or repair costs; which is categorized as HOA maintenance expenses.
They will also work closely with their clients to ensure that all paperwork is completed correctly and that all required documents are submitted in a timely manner. They will also act as liaisons between the client and insurer, providing advice on how best to proceed with each individual situation and helping to resolve any disputes that may arise during the process.
Capital Improvements vs Maintenance Expenses
Home owners often find themselves wondering about the differences between property maintenance expenses and capital improvements. It’s important to understand that while both can be beneficial for preserving quality, there are some prominent distinctions in their roles. The key focus of repairs is upkeep: ensuring a component remains as close to its original state as possible through routine maintenance efforts too. Meanwhile, upgrading components with more powerful elements would qualify as capital improvement – an investment into your property’s longevity which will ultimately serve you better over time than basic repair measures alone. Here are a few examples:
Maintenance and Repairs
- Servicing HVAC systems
- Roof and Gutter Inspection
- Outdoor Pest Control
- Landscaping
- Replacing old pipes in the bathroom
- Applying a sealant to fix a leaking roof
Capital Improvements
- Replacing roof
- Re-paving roads and sidewalks
- Building a Park
- Installing community swimming pool
- Construction of a new deck/patio
- Remodeling the Clubhouse
How Can Capital Improvements Benefit Your HOA?
Capital improvements can make your HOA more attractive to prospective buyers by improving curb appeal and making the area more desirable for people looking for homes in your neighborhood. Additionally, if done properly (and with careful consideration given to cost-effectiveness), capital improvements can help maintain or even increase property values over time. This can be especially beneficial for HOAs who want to keep their dues low while still offering attractive amenities that potential buyers will appreciate. Lastly, capital projects can also help create jobs and stimulate economic growth in the community.
Funding Capital Improvements: Where does the money come from?
Homeowners’ monthly dues are critical to the financial health of a homeowner’s association (HOA). These funds flow through two accounts: an operating fund and reserve fund. The operational account supports regular HOA expenses – like common area maintenance and repairs, while money is put in the savings-oriented reserve for larger improvement projects or unexpected outlays. To ensure that these reserves meet their long-term needs, HOAs should consider conducting a periodic reserve study to identify needed capital improvements – along with associated timelines – so they can start saving accordingly.
When it comes to an HOA Board’s responsibilities, understanding what capital improvements are and how they can benefit their community should be top priority. From windows and siding to roads and sidewalks – there are countless ways you can use capital improvements to improve the quality and value of your community. If you’re thinking about undertaking a capital improvement project, Avid Contractors has the experience and expertise to help you navigate the process and get the most out of your investment. Call us today at 833-GET-AVID to get started on your quote.
