HOA does not have Reserves. Community didn't approve Special Assessment. Sell?

Charlotte, North Carolina
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HOA does not have Reserves. Community didn't approve Special Assessment. Sell?

Lisa Wilson
Charlotte, NC · Member since 2014 · 31 posts · 4 votes

Hello, 

I own a townhome in a Community. The community has private roads not maintained by the City. There have been many water main breaks (significant issues with pipes) over the last few years. At this rate, the HOA will spend the small amount of reserves it has available if there are continuing problems which is likely. The Community voted no on a special assessment to increase reserves. UGH!

The property positively cash flows (a few $100 a month) but this seems to be very messy. I'm concerned about the consequences. 

Sell? 

Thanks!

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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    3y

    @Lisa Wilson

    I would sell as it’s going to turn into a money pit in the future. It appears hominy is not run very well to explain to people that by not fixing it now the cost will be 5x more in the future.

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  • Alena Beecher-Ritchie
    Real Estate Agent · Roswell, GA · Member since 2023 · 19 posts · 13 votes
    3y

    @Lisa Wilson

    Oh no, if the community votes against it, that could be a bad sign. It might indicate that the neighborhood is starting to decline. It's pretty telling if the community doesn't see the value in it.

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  • Richard F.
    Honolulu, HI · Member since 2008 · 3k+ posts · 2k+ votes
    3y
    Aloha,

    It does not appear the NC requires Reserve Studies OR reserves. HOA Owners need to understand the money does not magically appear...it only comes from their pockets. They can pay a little more now, or a big Assessment later. Loans are a poor idea for HOA's, as you are just adding the interest onto the cost of replacing elements that were statistically predictable to NEED replacing within a narrow time frame.

    You can prepare yourself if you keep the unit by ballparking a replacement cost for the major elements that you are concerned about or that are just not included in current reserve plans. Divide that total amount by the number of units in the project; estimate how many years before it is needed; set aside an amount each month that will ultimately fund your share of those elements within that timeline.

    Get involved with your HOA, help educate the Owners. See if there is a local chapter of Community Association Institute. They offer great resources to Owners and Board Members for learning about how an HOA should be operated.
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  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    3y
    Quote from @Lisa Wilson:

    The property value of homes in an HOA are directly impacted by how well the HOA is operated. If you have a bad board that manages poorly, the value of your property is directly impacted. For this reason, I recommend you avoid investing in HOAs. I would consider selling while the market is still strong and invest in a stand-alone home.

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  • Lisa Wilson
    OP
    Charlotte, NC · Member since 2014 · 31 posts · 4 votes
    3y

    All - thank you for your comments. Richard F. - thank you for your suggestion on a local chapter of Community Association Institute. I didn't know that was a thing. 

    Last night the community voted to APPROVE the special assessment. So, we'll be building up the reserves. That is good. 

    Having a good (or at least not bad!) HOA is so important. I need to get more involved.

    Thanks again. 

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