A reserve study is a snapshot of the costs associated with replacing and/or repairing common area components over the long term.(think roof, pavement, pool, HVAC etc.)
A comprehensive study should cover all major repair and replacement costs and funds should be set aside (known as Reserve Funds) by the Home Owners Association.
To put it simply, Reserve Studies help you plan ahead and protect your property value.
In order to do this effectively a Reserve Study specialist will do the following:
- Examine the association’s repair and replacement obligations.
- Determine the costs and timing of replacement.
- Determine the availability of necessary cash resources.
Because the HOA board has a fiduciary responsibility to manage association funds, a replacement reserve budget is extremely important.
Not only does this information inform the annual operating budget by providing owners with necessary financial information; the study is also an important management tool as the association aims to balance and optimize long-term property values and membership dues.
An up-to-date Reserve Study and a healthy budget are important for prospective homeowners because it allows them to evaluate property values in a more effective manner.
They are equally as important for association members, because reserve planning helps protect against declining property values due to deferred maintenance and unforeseen special assessments.
A good reserve study shows owners and potential buyers an accurate and complete picture of the association’s financial strength and market value. It should also function as a maintenance planning tool for the association and property managers.
Interested in getting a Reserve Study for your community? Click here to get a proposal!