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WHAT IS A RESERVE STUDY? 



‚ÄčA Reserve Study is a long term budgeting tool utilized by common interest communities which provides a long term timeline of costs and dates for replacement of common area components. Common areas such as roofing, fencing, paint, asphalt and siding all have limited useful life expectancies and a Reserve Study provides a community the necessary information to adequately save for the expected replacement of these items over time. 

Reserve study professionals utilize National Reserve Study Standards published in 1998 by the Community Associations ‚ÄčInstitute as a guide to creating a reserve study that is standardized to the industry with respects to terminology, concepts and funding models.


A Reserve Study is completed in several steps:


1. Component Analysis - Common area components are inventoried, assigned a condition assessment and researched for cost & useful life expectancy.  The reserve specialist will conduct interviews of the vendors, research historical replacement/repair data and utilize cost manuals during this process.

2. The Financial Analysis - The amount being allocated to the reserve account is then reviewed and compared to an ideal allocation rate which, with an understanding of the concepts, provides a "percent funded" figure which is the most reliable indicator of the financial health of an Association with respects to reserve account balance at a particular point in time. The reserve Analyst with then utilize all the information obtained and analyzed to develop one or more financial strategies for an Association which is in line with National Reserve Study Standards, Statutory Requirements and the long term goals of the Association.

3. The Reserve Analyst will then compile all of this information into a Reserve Study for review and incorporation by the Association into their long term budgeting plan. 

 


Written by Joel L Tax - Professional Reserve Analyst - 05/01/2016