This is a case study of an actual subdivision in southeast Louisiana. It illustrates very clearly the huge advantages and cost savings of self-management over using an outside management company.
I. Background
The subject subdivision consists of 233 lots, and contains several lakes, a park, and a playground. The first homes started selling in 2002. For the initial several years, the developer retained control, then a resident HOA board was formed. Annual dues were $100. Little is known about those early years, as apparently no consistent recordkeeping was done. The park and playground remained in the possession of the developer, but in 2008 he offered to donate it to the HOA, as he was largely finished in the subdivision. However, he cautioned that it would be necessary to obtain a liability policy, which cost several thousand dollars annually. The HOA board voted to accept the donation, and to raise dues to $250 per year. This was very reasonable, especially given that the subject’s amenities were far superior to those of surrounding subdivisions, some of which had higher dues. Over the objections of most residents, the board also felt that outside management was necessary, in order to preserve continuity as board members changed over the years. They interviewed several management companies, and chose the one which seemed to offer the best combination of price and service. The board signed a 3-year contract, which is the shortest that company would allow.
The subdivision’s annual income, assuming every resident pays their dues, is 233 x $250 = $58,250. The management company’s fees started at approximately $11,000 per year, or almost 19% of the entire budget. In return, the company was supposed to handle violations, collections, accounting, purchase recommendations, bill payment, website, and much more.