If the percentage of renters in a community exceeds 50%, many lenders require that the homeowners' association reserves be what percentage of HOA budgeted income?

In communities where the percentage of renters exceeds 50%, lenders often impose stricter requirements to safeguard their investments. One key requirement typically involves the homeowners' association (HOA) reserves. In this scenario, lenders commonly require that the HOA reserves be set at 20% of the budgeted income of the association.

The rationale behind this requirement is to ensure that the HOA has sufficient funds to cover future repairs, maintenance, and other unforeseen expenses that may arise within the community. A higher percentage of reserves provides a financial cushion, indicating that the HOA is financially stable and can adequately manage its obligations. This is particularly important in communities with a higher proportion of renters, as many renters may not be as invested in the long-term upkeep and value of the property compared to homeowners. Thus, establishing a reserve fund of 20% helps to mitigate potential risks associated with having a significant number of renters in the community.

By setting this guideline, lenders can ensure that the HOA is better prepared for any financial challenges, which ultimately supports property values and the overall health of the community.