What is a Reserve Study?
A Reserve Study is an independent long term analysis of common property. The analysis documents a condition assessment of the component inventory and estimates the cost of repair or replacements. It also provides a stable and equitable Funding Plan to offset the anticipated future major common area expenditures as they wear out over their predicted useful life.
How is a reserve study calculated?
A collaboration between the client’s resources and Reserve Analyst that brings together the client’s unique first-hand knowledge with the Analyst’s professional expertise
Why do we need a reserve study?
Here are just a few reasons to have a reserve study done:
- Helps the board fulfill its fiduciary responsibility
- Fulfill statutory requirements
- Guarantee the reserves are based on up to date information
- Buyers finding lack of reserves back out of real estate purchases
- Lenders finding lack of reserves may not lend money
- Satisfy the community’s governing documents
- The costs of maintaining the property will be fairly shared by all owners
- The reserve study provides a predictable replacement schedule
- A healthy reserve fund protects your investment
- Increases marketability
- Adequate reserves help avoid special assessments which are both unfair and difficult to collect
- The American Institute of Certified Public Accountants (AICPA)) requires the community association to disclose its reserve funds in its financial statements