Reserve Studies

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Reserve Funds: Do You Know How Much Your HOA Needs?

Funding community operations is one of the most important functions of an HOA board. Typically, there are two types of funds in your HOA – operating funds and reserve funds.  Operating funds are used to take care of day-to-day operations.

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Why Are Reserve Fund Studies Wrong 18 Out Of 25 Times?

Sounds like a university math problem, but it isn’t. Math problems have answers. Reserve fund studies are subject to numerous assumptions beyond anyone’s reasonable control. One such assumption made by far too many reserve fund planners (one that has been

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What is a Reserve Study in Your HOA?

The Reserve Study analyzes repair and replacement needs like roofing and painting that happen every year and provides a funding plan for accumulating money to perform this work when its needed. It is more a budgeting function than a construction

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Coming back from reserve fund shortfalls: Why the account might dip below adequate levels, and ways to replenish it

In an ideal world, condominium owners are satisfied with the way their corporation is run, fees are comparable to the condominium down the street, major repair and replacement projects are well-managed, and the reserve fund maintains a healthy balance. Then

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Real Estate Condo associations should build up reserves for a rainy day

A recent front page article in The Washington Post on the financial problems many aging condominiums in the Washington area are facing prompted me to write this column about the absolute necessity of maintaining adequate reserves.  Boards of directors can’t

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Is a Reserve Study Required Annually in California?

California Civil Code 5550 requires a Reserve Study based on a “diligent visual site inspection” at least every third year, but requires the Board review that Reserve Study annually and “consider and implement necessary adjustments”. That’s called an annual Reserve

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What is a Reserve Study and Why Should an HOA Board Care?

As a homeowner or renter in a homeowners association, you know the importance of setting aside a little bit of money each month in case of an emergency. After all, you never know when you might have to replace an

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What Successful Associations Do: Master the Reserve Study

Believe it or not, budget season is upon us again. Each association requires different levels of involvement from their board during the budgeting process. While a professional community association manager will assist you when you’re getting started, it’s important for

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The Critical Importance of Community Association Reserve Funds and Reserve Studies

Successful HOAs and community associations must plan ahead for their future needs, so they can budget and save today for property and amenities that will require repair and replacement well into the future. Money is allocated each year to a

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The Role and Importance of the Reserve Study in Determining an Appropriate Reserve Fund

A well-run condominium can be thought of as having two components: (1) physical assets, which are the buildings, structures, and grounds on which the condominium is located; and (2) financial assets, which are the funds necessary to maintain the condominium’s

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How a Reserve Plan Helps an HOA Board Protect Current Homeowners

Planning for future repairs and maintenance costs of common areas in the homeowner’s association is one of the most important jobs of an HOA board – and also one of the most neglected. Sometimes, boards are just short-sighted, focusing on

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Communities That Lack Reserve Fund Studies Face Uncertain Futures

In my last article I shared my disbelief that there isn’t a law requiring property owners associations to conduct reserve fund studies. Managing an association without a reserve fund study is akin to flying a plane without instruments, piloting a

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Funding Your Reserves – Making Strategic Choices

Popular management consultant Peter Drucker famously stated “The best way to predict the future is to create it.” With that in mind, what future do you want for your association? Will there be sufficient cash to maintain “curb appeal” and

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Reserve Studies 101 – The Component List

Reserve Studies help the board make informed decisions about the care of the main physical and financial assets of the association.  Reserve Studies help minimize surprises by accurately identifying the association’s major, predictable common area repair and replacement projects, allowing the association to give

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Read Your Reserve Study, Then Look Down

At a recent conference/expo I asked all of the reserve study companies if they had begun to include the things that are not obvious, in their studies.  Most said ‘no’, but they would try to help an association if they

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Depreciation reports trigger condo re-roofing boom (BC)

A fairly recent provincial Strata Property Act amendment requires strata corporations document future maintenance and assure sufficient funds are put aside to cover the work. The resulting depreciation reports are meant to inform consumers of what repairs are required for

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Quick Primer on Reading Reserve Funds Studies – Deficits! Deficits! Deficits!

It shocks me how regularly I find underfunded reserve funds in condominiums.  I don’t mean that from a perspective that based on the depreciated value of the asset, in accordance with the assessment of experts, that condominiums do not have

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Three Key Components to Look for in a Reserve Study

A Reserve Study can be broken down into (3) categories: Reserve component listing, Reserve Fund Strength and the Reserve Funding Plan (usually 30-year time span).    Read more………

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Reserve Planning in Your HOA: Yield, Safety & Liquidity

In recent years, reserve planning has become a long overdue reality for many older homeowner associations. The boom and bust mentality of deferred maintenance and special assessments has finally been replaced with proper long range planning and funding. For all

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The HOA’s Reserve Study

A Reserve Study is an essential part of running a homeowner association. It provides the board with a systematic way to schedule the repair and replacement of common elements and a fair way to distribute the costs of those events

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Dry Wells and Reserves

Dry Wells are designed to collect and dispose of storm water by allowing water to percolate into subsurface soils above the aquifer. All dry wells in Arizona must be registered with the Department of Environmental Quality. They are considered common

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Capital Improvements vs. Reserve Fund Expenses

Capital improvements are projects where a new asset is added to the community. It is a project that, once installed, will then create operating expenses and future reserve expenses. A good example of a capital improvement type expense would be

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Do Water Lines Belong in a Reserve Study?

When deciding whether a common area item belongs in a reserve study, refer to The National Reserve Study Standard four-part test: Is this item Association responsibility? Does this item have a limited Useful Life Expectancy? Does this item have a

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Community Association Reserve Studies – What you need to know, and tips for success.

Successful community associations, like successful businesses, plan ahead. Almost every community association budget has some level of contribution to a reserve fund which pays for major capital expenditures. Will your reserve fund balance actually meet those financial obligations? If you

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Proper Use of Reserve Funds Requires Proper Planning

Springtime and warmer weather can often mean the start of major repair or maintenance projects for an association’s common elements. As unexpected improvements become a priority, associations should look to the reserve accounting for funding. The hope is that a

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Why Spend Thou$and$ for a Professional Reserve Study?

There is an embarrassingly high level of resistance to reserve studies and reserve funding throughout the country. The pervasive attitude reflects an abandonment of long-term fiduciary responsibility. “I really don’t care about your tomorrow, because I won’t be here.” It

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Understanding the Reserve Study – Percent Funded

Do we have enough or too much money in our reserve account? This is a very common question board members ask. To answer this question you need to know what your association’s percent funded level is. We should begin by

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Saving for That Rainy Day: Reserve Funding for Your Condo Projects

These days, just about everyone is cutting back on spending, either to make ends meet, saving for something special or a rainy day, paying off debt or funding their retirement. Consumers are cutting coupons, looking for deals and keeping a

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HOA Reserve Study Process

Most Homeowners Associations in Arizona operate in much the same way businesses operate (or at least should). Every year board members and management companies sit down and work on next year’s budget. The annual operating budget is full of monthly

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Can you (still) Revise our Reserve Study?

Sometimes, the answer is no. Yesterday a former client asked about their Reserve Study which we completed back for their 2010 Fiscal Year. They recently found out that the short maintenance road to the adjacent water tower is their responsibility

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Reserve Data Analysis Process

Most Homeowners Associations in Arizona operate in much the same way as businesses (or at least should). Every year board members and management companies sit down and work on next year’s budget. The Annual Operating budget is full of monthly

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Boards – Take Notice – 3 big reasons properly funded reserves are essential

Only a few years ago the Virginia General Assembly recognized that many association boards just would not face up to the need for reserves in an effort to keep “dues” at a lower and more competitive level. Many are paying

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Live Long and Prosper – Life Spans of Building Systems

Nothing lasts forever, and though you can’t predict the moment a piece of building equipment will break down, you can prepare for it. Even the toughest boiler, HVAC unit, or elevator will eventually tucker out and need major repairs, or

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Live Long and Prosper: Life Spans of Building Systems

Nothing lasts forever, and though you can’t predict the moment a piece of building equipment will break down, you can prepare for it. Even the toughest boiler, HVAC unit, or elevator will eventually tucker out and need major repairs, or

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Funding for Homeowner Association HOA Capital Improvement Projects. What are the choices?

For the vast majority of Homeowner Associations HOA in America, capital improvement needs nearly always outpace the financial resources available to fund such projects. For many, Capital Improvements, Reserve Studies, Reserve Allocations, Annual Assessment Increases, and Special Assessments all send

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Reserve Studies – Where the Client is Not Always Right!

Conventional wisdom says the client is always right. Customer service principles support that concept: please the client, nurture relationships for repeat business, etc. But what if it is your job to provide professional counsel, and the nature of the news

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Should a Reserve Fund Policy Ever be Unfair?

So much of the field of Reserve Studies and reserve fund budgeting is about being fair. The core goal is attempting to have the owners enjoying the use of the association’s assets pay for the deterioration that occurred to those

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Can Beach Sand Replenishment be a Reserve Component?

This question came from an oceanfront homeowners association, where the beach in front of their clubhouse is significantly smaller than its historical size. The lifeguard stand had to be moved back, and the association barely has room for its volleyball

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Underfunding Reserves: Keep Calm & Be Smart!

Society is replete with examples of intelligent people doing foolish things, especially regarding their homes and their money. Homeowners know that maintenance and repair expenses are unavoidable, that the cycle of deterioration begins the moment the last shingle is nailed

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Should Your Reserve Study Contain a Contingency Fund?

This question was posed to me recently. I checked with two Reserve Specialists for their opinions Here are there comments:    Read more…..

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What Is Your Reserve Study Telling You?

Over the years we’ve helped hundreds of clients prepare and plan for future expenditures with Reserve Studies. Reserve Studies serve as a “Road Map” to guide an association through the ups and downs of the uncertain future.    Read more………

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Reserve Component Failure Modes – Replace Them on Schedule or Not?

When something fails, it fails, and you replace it. Right? Well… sometimes, sometimes not. A leaking roof has clearly failed. But when do you decide that the old (ugly) gold shag carpet and beaded doorway in the clubhouse has “failed”?

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5 tips for reading your Reserve Study

Over the last 30 years we’ve helped thousands of clients across the country anticipate and prepare for their community’s major repair and replacement costs with Reserve Studies. Armed with this knowledge HOAs can make accurate disclosures to homeowners and set

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Property Managers and Financial Education

I recently interviewed with a local HOA seeking to replace their present property management. One of the questions I was asked was “Why does it matter that a property manager have a background in finance and/or economics?” My response was

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The Flaw of Averages!

The two most common Reserve Funding objectives are Full Funding, where the Reserve Fund is designed to exactly offset the amount of Association deterioration, and Baseline Funding, where the Reserve Fund is designed to stay cash-positive at all times.  Read

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What Is a Reserve Study In Your HOA?

The Reserve Study analyzes repair and replacement needs like roofing and painting that happen every year and provides a funding plan for accumulating money to perform this work when its needed. It is more a budgeting function than a construction

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Can we Reserve for Landscaping?

Great question! A reader asked this yesterday, describing their association as a residential association with many private homes along a common street, with little other common area assets (a gate system and a tot lot). So their idea about a

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Is “Scope of Work” a Required Reserve Study Disclosure?

Good question. Often when a client challenges our replacement cost estimate because “it is way off”, we look into why their actual cost is out of line with what we expected. Typically we find it has to do with scope

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How Often Do We Update Our Reserve Study?

Did you know you can potentially save money by getting an updated Reserve Study? Reserve contributions are a large part of any association’s Operational budget. If you are relying on a 2-3 year old Reserve Study to set next year’s

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