HOA Budget 101: What Every Line Item Means and How to Build One From Scratch
You just joined the board and someone handed you last year's budget. It's a spreadsheet with 40 line items and no explanation. This guide walks you through every one.
The two parts of every HOA budget
Every HOA budget has two sections:
- Operating expenses — the ongoing costs of running the building day-to-day (utilities, insurance, landscaping, management)
- Reserve contributions — money set aside for future capital projects (roof replacement, elevator modernization, parking lot resurfacing)
Your monthly assessment covers both. A typical split is 70% operating / 30% reserves, but it varies wildly by building.
Operating expenses: every common line item explained
Utilities
| Line Item | What It Covers | Typical Range (per unit/yr) |
|---|---|---|
| Water & Sewer | Common area and sometimes whole-building metered water | $400–$1,200 |
| Electric — Common | Hallway lights, garage lights, elevator, lobby, laundry room | $200–$600 |
| Gas — Common | Boiler, common area heating, pool heater | $100–$500 |
| Trash & Recycling | Waste hauling contract | $150–$400 |
| Cable/Internet | Bulk TV/internet if building-wide contract | $0–$600 |
Insurance
| Line Item | What It Covers | Typical Range (per unit/yr) |
|---|---|---|
| Property & Liability | Master policy covering the building structure, common areas, liability | $500–$2,000 |
| Directors & Officers (D&O) | Protects board members from personal liability for board decisions | $50–$150 |
| Workers' Compensation | Required if you have any employees (even part-time) | $0–$200 |
| Umbrella / Excess | Additional liability coverage above the master policy | $30–$100 |
Maintenance & Repairs
| Line Item | What It Covers | Typical Range (per unit/yr) |
|---|---|---|
| Landscaping | Grounds maintenance, tree trimming, irrigation | $100–$500 |
| Janitorial | Common area cleaning, lobby, hallways, laundry room | $100–$400 |
| General Repairs | Catch-all for unexpected fixes (plumbing, doors, locks) | $100–$400 |
| Elevator Maintenance | Monthly service contract + inspections | $150–$500 |
| Pest Control | Regular treatment for ants, roaches, rodents | $30–$100 |
| Pool/Spa Maintenance | Chemical treatment, cleaning, inspections | $100–$400 |
| Fire/Life Safety | Fire alarm monitoring, extinguisher service, sprinkler inspections | $50–$200 |
Administrative
| Line Item | What It Covers | Typical Range (per unit/yr) |
|---|---|---|
| Management Fee | Professional management company (if applicable) | $180–$480 |
| Accounting & Tax | CPA for annual tax return + financial review | $50–$200 |
| Legal | Attorney for CC&R questions, collections, disputes | $30–$150 |
| Reserve Study | Professional reserve study update (amortized annually) | $20–$100 |
| Office & Postage | Printing, mailing, supplies | $10–$40 |
Reserve contributions
This is the money you save for future capital projects. Your reserve study tells you how much this should be. A well-funded HOA contributes 25-40% of total assessments to reserves.
If your total budget is $120,000/year and you're contributing $20,000 to reserves, that's only 17%. Your reserve study probably recommends more. This gap compounds every year.
How to build next year's budget
- Start with last year's actuals. What did you actually spend? Not what you budgeted — what you spent.
- Adjust for known changes. Did insurance go up 12%? Did you sign a new landscaping contract? Apply known price changes.
- Add inflation to everything else. 3-5% per year for most line items. Utilities and insurance often run higher (5-8%).
- Set the reserve contribution based on your reserve study's recommendation.
- Total it up and divide by units. That's your monthly assessment per unit.
- Compare to current assessments. If there's an increase, communicate it early and explain why.
Common mistake: Boards often budget too little for "General Repairs" because they don't want to raise assessments. Then when something breaks, they raid the reserve fund for operating expenses. This makes the reserve deficit worse every year. Budget realistically — it's easier to explain a $20/month increase than a $5,000 special assessment.
What makes a budget "good"?
- Actuals are within 10% of budget for most line items by year-end
- Reserve contributions match the reserve study recommendation
- No line item is zero that's been nonzero historically (that's wishful thinking)
- There's a contingency line (2-5% of total) for surprises
- It's been shared with owners before the annual meeting
Start with a template, customize in minutes
Candor includes HOA budget templates by building type. Pick one, adjust the numbers, and your budget is done. Or upload last year's budget PDF and AI extracts every line item.
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