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Sunset Villas
A Real-World Case Study of an HOA on the Brink - and How it Recovered
1. The Perfect Storm: How Sunset Villas Collapsed Financially
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A. The Crisis Breakdown (2022)
Metric Status Why It Mattered
Operating Balance$ 12,000 (0.5 months reserves) Couldn’t cover emergencies
Delinquency Rate 18% ($62,000 unpaid) Cash flow paralyzed
Insurance Premiums +40% hike ($28k → $39k) Forced dues increase
Failed Special Assessment $250k roof vote failed (65% "no") Critical repairs delayed
Legal Liabilities 2 lawsuits (slip-and-fall, ADA violations) Added $35k in legal fees
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Key Trigger: A hurricane caused $180k in uninsured damages, exposing years of financial neglect.
2. The 12-Month Emergency Turnaround (2023)
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A. Phase 1: Stop the Bleeding (Months 1-3)
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1. Forensic Audit Uncovered:
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$15k in mismanaged funds (duplicate vendor payments, unrecorded fines)
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Solution: Hired a CPA specializing in HOAs to implement QuickBooks tracking.
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2. Emergency Cash Injection:
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$50k bridge loan (9% interest, 2-year term) to cover insurance premiums.
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15% emergency dues increase (from $600 → $720/year).
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3. Delinquency Triage:
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Implemented "Amnesty Program": Waived 100% of late fees if paid in full within 60 days (42% uptake).
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Auto-Pay Enrollment Drive: 5% discount incentive boosted sign-ups from 12% → 58%.
B. Phase 2: Restoring Trust (Months 4-6)
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1. Transparency Overhaul:
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"Financial Reality Tours" – Board led walks showing:
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Crumbling roof edges (leaking into units)
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Rotted decking (lawsuit risk)
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Quarterly Budget Mailers with infographics (e.g., "Your $720 dues: Where it REALLY goes").
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2. Alternative Financing for Roof:
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$175k loan at 5.5% (7-year term) vs. failed $250k assessment.
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Terms: $2,300/month payment (covered by dues increase).
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3. Cost-Cutting Wins:
Action Annual Savings
Switched to LED lighting $6,200
Installed smart irrigation $4,800
Negotiated trash contract $3,500
C. Phase 3: Long-Term Fixes (Months 7-12)
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1. Reserve Recovery Plan:
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New policy: 20% of dues now fund reserves (was 5%).
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Projected: Reserves to hit 80% funded by 2026.
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2. New Revenue Streams:
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Clubhouse rentals ($1,500/month)
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Guest parking permits ($25/night, $8k/year profit)
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Cell tower lease ($12k/year)
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3. Insurance Pooling:
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Joined Texas HOA Insurance Co-Op, cutting 2024 premiums by 12%.
3. The Results (2024 Update)
Metric 2022 (Pre-Crisis) 2024 (Recovered)
Delinquency Rate 18% 6%
Operating Reserves $12k (0.5 months) $85k (4 months)
Insurance Costs $39k $34k (after co-op)
Homeowner Satisfaction 29% (approval) 71%
Critical Lesson:
"You can’t cut your way out of a crisis—Sunset Villas survived by combining tough fiscal discipline with creative revenue and relentless homeowner communication."
-DK Shackelford, HOA Financial Advisors (HOA Wealth Advisors)