How Much Does Self-Management Save?
This is an important question to be determined by the board member providing his or her time to the association, as well as members of the association.
An example is highly instructive. Assume a typical 40 unit condominium association in Southern California is being self-managed. The average management fee will be approximately $860 per month. This will depend on a number of factors, but is a good estimate. This means that every unit saves $21.50 per month with self-management. The unit owner providing the management and accounting services also saves $21.50 per month.
Most management companies will invest about 3 to 4 hours per week providing management services, including accounting services, to a 40 unit HOA. Using the lower number of 3, this means about 13 hours per month (assumes 41/3 weeks per month).
The owner providing free services for their neighbors is presumably spending the same 13 hours per month for a saving of $21.50.
This equates to compensation of $1.65 hour. ($21.50 ÷ 13). (This is not a typo).
Some owners are happy to let one of their neighbors work for $1.65 per hour, but many owners providing the service soon resent the arrangement.
The owner-manager also accepts the liabilities associated with accepting responsibility for providing management advice and services to the association which is usually a corporation. This is not an insignificant risk.
In addition to the substantial monetary disadvantage for the owner-manager, the association gives up the following in order to avoid paying an average of $21.50 per unit month:
- Professional accounting services with all of the checks and balances that should be expected;
- Volume purchase discounts available to most management companies;
- Professional advice on construction, assessment collections, election procedures, and other significant matters;
- Objectivity; and
- The stigma associated with self-managed homeowner associations, including higher interest rates when owners refinance their real estate loans.
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