HOA Snapshot Reserves

Written by Posted On Tuesday, 27 August 2013 17:00

A reserve study identifies a homeowner association's future repairs and replacements like a snapshot in time. Imagine that you could picture the buildings and grounds as they would be in five, ten, even thirty years. A reserve study acts just like that by estimating the useful life of the common elements and the cost to replace them in the future.

A reserve study includes common element components that have useful lives of, usually, 2 to 30 years, a schedule of when events should take place and a funding plan to advise the board how to accumulate the money needed to pay for those events. Those "components" consist of obvious things like Roofing, Painting, Paving, Pool Plastering, and the not-so-obvious like Treework, Landscape Renovation and Safety Inspections (elevator, fire sprinklers and alarms, tripping hazards). Even the smallest HOAs have at least 15 items that should be included. Large homeowner associations can have hundreds.

Assumptions made for a reserve study can change over time. Reserve studies can be affected by new labor-saving techniques, building designs and materials that reduce projected costs or extend useful lives. As these improvements become known, so should your reserve study. Annual updates confirm that the schedule and costs are still accurate.

Age, condition and rate of deterioration can be positively impacted by preventive maintenance implemented by the HOA which increases useful lives. Changes in inflation and the interest earned from invested reserves need to be revised as well.

The annual update is a snap compared to the initial reserve study which requires significant field work to compile data. The annual update merely tweaks certain aspects of the original study.

Now that you're focused on reserves, it's time to start shooting. Frame by frame, the results will develop picture perfect.

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