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Property Managers | BarreraCo

The Importance of a Reserve Study

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Reserve StudiesA 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:

  1. Examine the association’s repair and replacement obligations.
  2. Determine the costs and timing of replacement.
  3. 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!

Property Managers: Protect Yourself!

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Over the past 30 years we’ve worked with HOAs and Property Managers to complete more than 17,000 Reserve Studies nation wide. In doing so we’ve learned a thing or two about this unique 3-way relationship.

A Reserve Study is a financial planning tool to help communities identify and prepare for future expenditures. A properly funded reserve, according to a recent Reserve Study, is the best way to protect property values and minimize special assessments.  You can think of it as one part Physical Analysis and one part Financial Analysis.

Read More: What’s a Reserve Study

Tip 1: Assess the Board

The first thing you should do is assess the board you’re working with. You need to understand early on whether you’re dealing a proactive or reactive Board. We know that a properly funded reserve protects property values and reduces the likelihood of special assessments, but ultimately the decision to fund is not up to you. You can only recommend that they follow the professional advice of the Reserve Analyst.

Read More: The Reality of Underfunded Reserves

California Law mandates a Physical Inspection each year and an Assessment and Reserve Funding Disclosure (ARFD) every 3 years. While the law does not require Boards to fund their reserves, it does require that the information is documented and disclosed either way.

Read More: Reserve Studies and California Law

Tip 2: Use Meeting Minutes

So what happens if the Board doesn’t follow professional recommendations?

As a Property Manager, the best way to protect yourself against unjust blame down the road is to denote such decisions in the meeting minutes.

New Board Members come and go and the first thing they want to figure out is what decisions were made before they came on and why. If they find a Reserve in bad shape the first person they tend to blame is the Property Manager. Make sure you can point to meeting minutes that show the conscious decision to not follow professional recommendations. This is the best way to protect yourself.

Watch as our Chairman, Damian Esparza discusses this issue at a recent conference for Property Managers.

 

At Barrera and Company, we complete thousands of Reserve Studies each year which have helped our clients comply with the law and prepare for upcoming expenditures. 

Interested in getting a Reserve Study for your community? Click here to get a proposal!

HOAs – Don’t Let This Happen to You

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At Barrera and Company, we’ve helped thousands of clients anticipate and prepare for their community’s major repair and replacement costs by providing them with affordable and accurate Reserve Studies to meet their needs. In doing so, we’ve saved them tons of time, energy and money.

However, this economy has some HOAs struggling to make ends meet. As a result it’s way to easy to adopt the “out of sight, out of mind” mentality. Skipping your next scheduled Reserve Analysis is bad but underfunding your Reserve and ignoring upcoming repair and maintenance costs is even worse.

“If you fail to plan, you plan to fail.”

We’ve seen this time and time again. You may think you’re saving money but you are setting your community up for failure in the long run. Failing to plan ahead does not make the issues go away. In fact, they’re getting bigger and more expensive by the minute.

Short-sided community management will inevitably culminate in the form of Special Assessments, or worse, devalued real estate.

After looking closely at roughly 1000 past clients, we made a startling discovery.

Watch as our Chairman of the Board, Damian Esparza reveals our findings at recent conference for HOA board members.

HOAs, don’t let this happen to you!

At Barrera and Company, we complete thousands of Reserve Studies each year which have helped our clients comply with the law and prepare for upcoming expenditures. But don’t take our word for it, check out some of our projects and recent reviews.

Interested in getting a Reserve Study for your community? Click here to get a proposal!