Would it surprise you to learn that some condominiums are using as much as 35% of their total annual budget on administrative costs?

While every condo community is unique, it doesn’t hurt to benchmark your expenses against similar buildings to see where your building’s budgeting strengths and weaknesses lie.

Everything is more expensive today than it was a few years ago, so condominiums must be extra thoughtful when evaluating and agreeing to expenses. Though this won’t be possible for every condo community, there are things some buildings can do to reduce their administrative expenses.  

Table of contents

• Condominium expenses
• What qualifies as an administrative expense?
• Factors that influence admin expenses
• Cities that pay the most in administrative costs
• How to budget for and reduce administrative expenses

Condominium expenses

For the purpose of this article, we have divided condo expenses into 5 key categories: administrative expenses, property and liability insurance, operations, reserves and utilities. Your location, the age and size of your building, and the larger economic conditions of your state will dictate what percentage of the total budget is allocated to each category.

If you’d like, you can complete this chart to see roughly how much your building is allocating to each category. Keep in mind that anything less than 10% is relatively low, and anything more than 25% is considered high. However, having a high number isn’t necessarily bad – it may be essential to spend a lot on a certain category in order to comply with laws or keep up with insurance. Furthermore, it is normal for condos to contribute anywhere from 15% to 40% of their total budget to the reserve fund.     

What qualifies as an administrative expense?

When dealing with condominiums, administrative costs may be classified as any expense necessary to maintain day-to-day operations of the condominium. This includes:

• office rent
• accounting fees
• legal fees
• licenses
• permits and taxes
• office equipment and supplies
• bank or loan fees
• professional/management fees
• events

Factors that influence admin expenses

Size of the building

The more units there are in a condominium, the more administrative work there is to complete. A complex with three towers and 400 units will require more invoices, receipts, payments, and reports than a mid-rise condo with 50 units.

Similarly, the more people there are in a community, the more help the board will need to manage them. That equates to paying professionals more money for their time.

Owners

The level of involvement and participation of owners and residents also contribute to annual admin expenses. High engagement is a positive thing, but communities have to pay to rent out spaces for meetings or print out documents requested by residents.

Job market

Employment rates vary from one city to the next, meaning some condos will have to pay top dollar to attract or keep experienced service providers, while others can afford to shop around for a competitive rate.

Legal matters

Condo communities need legal assistance, period. From new legislation to lawsuits, attorneys who specialize in condominium issues are invaluable. They can help ensure communities stay compliant, and keep associations/corporations out of court. But, their specialized skills come at a high price.

Most communities have an attorney on retainer, but there will be years when the board ends up spending more on legal fees than they had planned to. An unexpected lawsuit or persistent issue with an owner can easily create thousands of dollars in unforeseen legal expenses.      

Cities that pay the most in administrative costs

A well-known property management company recently released a report containing sample information collected from various condo communities in the United States and Canada. While the numbers it collected may not be reflective of the states and provinces as a whole, the data does provide some idea of how condominiums are spending their money.  

Generally speaking, condominiums are having to adjust for higher operations costs. But Las Vegas and Reno, Chicago and Dallas are all dealing with big administrative costs in addition to other expense increases.

• Las Vegas and Reno – 35% of annual budget
• Chicago – 32% of annual budget
• Dallas – 23% of annual budget

In both Las Vegas and Reno, labor costs are surging due to inflationary pressures. Since it costs more to complete their jobs, staff must also charge more for their services. On average, a condo unit is paying $4,919 in 2024 for administrative expenses.  

Chicago condominiums faced 3% to 5% cost increases between 2023 and 2024, driven primarily by high insurance premiums and labor expense pressure, especially for properties with several staff members. In 2024, administrative costs average out to $5,599 per unit.

The local real estate market in Dallas is volatile, and that has created financial stress for condominium communities. In addition to big spikes in operational costs, insurance premiums have increased by over 100% in some cases. Many buildings have had to improve their compensation strategies to retain staff, who are in a better position to help these associations tackle mounting financial pressures. In 2024, administrative costs average out to $5,425 per unit.  

How to budget for and reduce administrative expenses

It’s not always possible to cut administrative costs, especially if there are external factors impacting the price of certain services, interest fees, etc.

However, every community should have a budget for these (and other) expenses so that they can proactively manage costs and potential issues instead of scrambling to address financial challenges. You might not be happy with the numbers, but at least you can prepare to make some tough choices.   

Complete a budget first

Administrative expenses encompass a wide range of costs. Since the list can be long, it only makes sense to document each cost in a budget. This makes it easier to monitor and compare costs, as well as identify abnormalities and prepare for increases.

Disruptions to administrative activity can create issues for owners and residents, which means more problems for the board. Having a realistic budget will help to ensure consistent and reliable administrative operations.

Assess current and future needs

To effectively budget for administrative expenses, it is essential to assess current and future needs of the building. For example, if there are plans to introduce new amenities or start a major project, additional administrative expenses will need to be factored into the budget.

Use less paper

Admin work requires a lot of documentation. Whether it’s sending out a letter, paying a bill, or documenting numbers for records, condominiums can easily go through thousands of pages of paper every year.

The cost of paper, ink and postage may not seem all that significant, but it can add up quickly. Using software, including condo management software, email, accounting software and/or document storage programs, can drastically reduce paper usage and associated costs.

For example, if owners and residents have the option to consent to receive e-documents, then the manager or staff member responsible for communications can send out multiple notices to residents instantly. Not only does it cost less to send something electronically, but it reduces the workload for staff, too.   

Condo management software automates several manual processes and eliminates the need for paper records and invoices.

Introduce online payments

If you want fewer late payments and less complicated payment processing procedures, give residents an opportunity to make payments online. They will appreciate the convenience and simplicity, and your staff will appreciate how this option streamlines payment processing. There will be fewer checks to cash, and fewer invoices/receipts to create.

An online payment processing system also generates monthly financial statements and annual budgets based on the transactions recorded in the system. Staff/the board can harness this information and use it to identify payment patterns and refine payment policies if needed.  

Empower owners to help themselves

Condo communities are turning to technology and automation more and more because it has demonstrated that it can save communities money while increasing efficiencies. Moreover, it can help to improve the resident experience.   

For example, condo management software allows owners and residents to pay fees, receive notices, access forms or documents, and submit service requests using their phones. They are empowered to do more for themselves when it is most convenient for them, and admin staff get more time to work on other tasks that technology can’t take care of.

Bundle subscriptions and/or services

If the association/corporation currently uses multiple platforms or solutions to assist with day-to-day operations, look at options to consolidate or bundle subscriptions and/or services.

Conclusion

Budgeting for administrative expenses is not a one-time task. Costs fluctuate, and adjustments will be required as challenges and needs evolve. By periodically assessing the budget, the board can reduce or reallocate funds as needed, and ensure the preservation of smooth and effective day-to-day operations.