What is Reserve study and Its Benefits

It is very important for every association managed community to have adequate funds in reserve to keep with the general repairs and replacement of the common areas which are part of the association. It is with the help of reserve studies that associations can have an effective plan in place to keep up with the costs of the facilities and ensure that the members of the associations are not required to carry the burden of sudden repairs and replacements.

What is Reserve study?

Reserve studies are effective financial tools for association-governed communities for planning the long-term repair and replacement needs of the common elements. Associations use these studies for forecasting their funding requirements for any kind of major repairs as well as capital assessment along with assessing the need for improvements in financial reserves. Many of the condominium associations in the US have made it compulsory for the associations to conduct these studies at regular intervals.

During such studies, the physical components of the properties that are a part of the association are thoroughly evaluated, and the existing reserve funds are analyzed. Depending on the on-site evaluation, a report is created with detailed information of the elements that might need replacement or repairs in future and how the association can maintain adequate funds in reserve to keep up with these expenses. These studies usually cover such capital expenditures for 30 years.

Benefits of Reserve Analysis and Study

Some of the benefits of such studies include
  • Predictable Costs- With the help of a Reserve study, the members of the association are not required to pay for any kind of special assessment. As detailed information about the expenses is made available in the study report, the owners are well aware of all the costs.
  • Increased Income from Investment- The associations which quickly spend the money they collect do not earn as much interest. The associations with adequate funds in reserve can take advantage of the long-term interest which actually helps in reducing the money required from assessments.
  • Increased Value of Property- Associations which have already projected their future expenses and already have adequate funds for them are highly attractive to new buyers. This helps in significantly increasing the resale value of the property.

With the help of such studies, the board can consistently take effective decisions which in turn will also help in increasing the confidence of the owners on the leadership of the board members. There are professional organizations that can conduct Reserve study and analysis periodically for the associations. They use updated software to ensure that associations are always in control of the funds and are updated.