Tag Archives: studies

What Is a Reserve Study and why do we need one?

A reserve study is an in-depth evaluation of a property’s physical components and an analysis of its reserve funds. Based on a thorough on-site inspection, a reserve study details anticipated replacements or repairs to common-area elements and recommends annual reserve funding to cover capital expenditures for the next 30 years.

Reserve studies give community association managers, board members and property owners assurance that future major property expenses are identified early and that a funding plan is in place to pay for those expenses.

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Reserve Studies Minimize Liability

These days it seems that boards are being barraged by many issues that weren’t even considered only a few years ago.  Lawsuits and claims of financial mismanagement are taking place on a daily basis.  They are at best a nuisance, and at worst very costly and stressful. 

Over the years, homeowners have volunteered to serve on the board because they had expertise and skills from professional careers that were applicable to the association.  Examples include attorneys, accountants, and engineers.  Boards were comprised of people with these skills as well as other owners who were simply concerned about protecting their most important investment – their home.  This approach generally worked well in the early years of the association industry.  Today, however, community associations are required to be managed more like a business. One example of this is the need to plan for future capital repairs with an adequate reserve fund. 

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Why should we do a reserve study or fund our reserves?

While the question seems simple, the reasons and motivations vary slightly depending on whether you are a manager, a Board Member, or a community resident. So in order to discuss these motivations, let’s first look at the basic reason why Reserves exist in the first place.

Protect and Enhance – The basic, bottom line, cut-to-the-chase principal here is this: Adequately funding the Reserves protects and enhances the physical assets in the community. It also protects and enhances the investment that each owner has made in buying property in the community. It does this by making sure that funds are available to replace worn out components on a timely basis while avoiding the need for special assessments.

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Reserve Studies

 

Reserve Studies

reserveUnsure if your community has adequate reserve funds to cover future property needs properly? A well-prepared reserve study by Community Association Management can help put answer that question and give residents peace-of-mind...

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