Reserve study is a vital component of HOA management. It helps gauge if an association has sufficient funds to plan and execute a long-term budget. In many cases, the study is conducted to determine and develop a strategy to collect cash or funds for the future. A large part of HOA’s financial planning depends on reserve studies for the associations of your community.
However, conducting comprehensive HOA Reserve Studies is complex and often intimidates or overwhelms board members. But if you develop an in-depth understanding and seek professional help to implement reserve study, you will realize that it is an integral part of managing an HOA.
If you’re looking to determine the stable yet minimum level of funds to accommodate future capital projects, the article includes everything you need to know.
What does Reserve Study Represent?
Typically, an HOA reserve study refers to an in-depth on-site inspection or analysis of the assets of an association. The analysis typically provides a financial road map for an association. The studies or financial researches for Homeowners Associations are crucial in helping the board decide on the organization’s future financial course.
An HOA reserve study generally consists of two sections:
· Physical Analysis
This part of the study assesses the physical state of areas HOAs are tasked with improving with and managing the cost. The physical analysis also includes a cost study of the repair or replacement.
· Financial Analysis
The association’s financial situation is evaluated in this study section, including its reserve fund balance, income, and outgoing costs.
How Should You Approach Your Reserve Study
Find a reserve study business that employs multi-disciplined engineers with recognized professional credentials. HOA members should anticipate thorough plans that clearly describe the state of the common elements in their community association and a financial strategy to cover any necessary future replacements.
Community Associations Institute suggests that every reserve study must include at least seven to eight items to give your community the direction it needs to prioritize capital projects and keep its finances stable.
How do Reserve Funds Help you Stay on Top of HOA
Reflecting Values in the Real World
Updating your reserve study annually can offer your association plenty of benefits. It is an easy way to reduce or manage the need for thorough assessments, enabling board members to get an accurate picture of the association’s funds and finances. This way, the association can be proactive in planning significant expenses for the long-term future.
The best way to deal with the complexity of reserve studies is to hire HOAs professional services for consulting and claims assistance. Professional firms such as David Bach & Associates have the expertise and competence necessary for such a task. These experts also have an understanding of homeowner association construction projects.
Don’t Settle For Less
Some HOAs try to impose lower fees, but they almost certainly won’t be able to cover the reserve fund that way. This is often a sign of a bad HOA management strategy, which could eventually hurt the organization if an unforeseen capital project is required.
A successful reserve study underpins a comprehensive budget, improving the association’s financial stability and fostering a friendly relationship between board members and homeowners.
