So your condo and HOA has a capital improvement project that cannot wait any longer. The board has put off the maintenance or repairs long enough and its time the roof, pool, drive way, plumbing, electrical, security or painting job finally got done. No matter what, it is it’s going to cost a nice chunk of change and the reserves have been depleted due to the financial crisis that we are just coming out of. Its time to think about Community Association Loans.
What do you do? You have identified the problem and received your requests for proposals and the vendor selected the job will be charging the association $150,000.00 (just an example). You have 100 units in your association and that will be a special assessment of $1,500.00 per property. Some of the unit owners will just whip out their check books and pay for the work, but others have very carefully and precarious family budgets and they cannot afford to break off such a large chunk of money at once or even over six months time. What do you do? What can you do?
The first thing to consider regarding community association loans is the time required to pay it off. So lets say that the $150,000.00 community association loan can be paid off over a few years (let’s say three years). Now let’s work out the math here. A $150,000.00 loan at 7% from your bank over three years will require a $4,631.56 payment per month by the association, and broken down by unit owner that would be $46.32 per month. That seems to be a lot better than being slapped with a $1,500.00 per unit bill, and certainly can be worked into almost any family budget.
But what if your community association does not qualify for a community association loan from your bank? Well, if that is the case there are plenty of lenders who are specialized in working with community association loans. They are ready and willing to make community association loans at competitive rates and with a lot less hassle. So let’s do some more math here: A $150,000.00 3 year loan with a Condo or HOA specialty lender may cost your association 10% and that makes for a monthly payment of $4,840.07 which means $48.41 to each unit owner (a 2.09 cent difference between a bank loan or a specialty finance company loan). Hardly a disruption in your family economy.
So if your community association needs to do a capital improvement project and the board does not want to slap everybody with a large bill, that is payable in a short amount of time, think about community association loans for that special assessment and making it easier for your members to be able to afford to pay what they owe.