A homeowner’s association (HOA) ensures that a community’s common facilities get the care and repairs they need to remain safe and working. To do so, the HOA sets a reserve fund study for significant repairs and maintaining common areas such as pools, green spaces, and playgrounds.
A reserve fund specialist helps determine when the repairs are due and how much it’ll cost to make them happen.
Here are seven things you’ll want to keep in mind before conducting your next HOA reserve study.
Understand Who Pays?
An ideal time to conduct the study is when the facilities are new. So you can do it before the homes are fully occupied.
In such a case, the HOA pays for the study. Once the association has the projections, the homeowners deposit money in the HOA reserve account.
Start with a Full Study
You will need several studies to estimate the costs of repairs and replacements and determine shared facilities’ useful life.
Start with a complete site inspection to get the measurements, number, and photos of common area components.
The first evaluation determines the deterioration of capital items and when to do replacements. The study report also estimates the costs for maintenance.
What About Update Studies?
A reserve fund expert follows the complete reserve study with two levels of updates.
The first follow-up includes a site visit. It is an update of the full survey and helps capture any details that the first sweep might have missed.
The second evaluation does not require a site visit. It helps with planning and making adjustments for minor changes. These follow-up studies may come annually or every two years, depending on property use.
Some HOA boards may skip the update studies to their detriment.
However, the evaluations are vital as there could be changes in repair prices or variations in the original funding plan.
A Reserve Fund Study Involves Physical Assessments
The study report provides physical assessments for an HOA.
Its details include;
- What will need repairs or replacement
- The time when the repair or replacement should happen
With that information, you can then come up with accurate plans and estimates.
It is a Financial Planning Tool, Too
Property projects need good budgeting. The reserve study recommends;
- The amount of money that goes to maintenance
- Annual expenditure
- Reserve fund contribution for members
- Scenarios when the fund contributions should increase
So, make sure you have that kind of information to guide you from the start.
Remember that the Reserve Fund is an Estimate
Your reserve study specialist uses advanced tools and previous experiences to estimate how much the works will cost.
However, these predictions are guidelines and may change with situations.
For example, some assets could reach the end of useful life earlier than you’d expected. So, do create some wiggle room to accommodate any emergency repairs or purchases.
Remember What Makes a Reserve Fund Report Great and Useful
The study should be easy to understand.
Where applicable, add visuals such as photos, tables, diagrams, and graphs. Use simple language so your community can understand what you are proposing.
The report should also have spreadsheets with formulas to help you calculate and budget for maintenance.
Also, feel free to consult a reserve fund study specialist to guide you through the process—over to you.