Reserve studies are incredibly beneficial for condo associations. But they can also get overwhelming. For today’s article, we talk about what a reserve study is and how it is helpful for HOAs.
What is a Reserve Study?
A reserve study is a tool for long-term capital budget planning that shows the state of your association’s reserve account. To estimate the cost of upkeep and predict when assets will need to be repaired or replaced, a reserve study is a comprehensive analysis of an HOA’s various components.
Since it studies an HOA’s reserve account, it should not be confused with an operating account that you use to pay your bills. A reserve account is like your savings or piggy bank account. It is called “reserve” because it deals with the money you set aside to use for your association’s capital expenditures and general building repair and maintenance.
How Much Should Be in a Reserve Account?
There are guidelines for that, but this is where a reserve study is incredibly helpful.
When conducting a reserve study, a third-party company comes in and goes through your entire property from roof to floor. They will determine the life expectancy of the different items and aspects of your property, how much it would cost to replace them, and when they should be replaced.
Let’s pretend we are talking about the roof. If reserve study specialists look at your roof and say, “Well, typically, a roof lasts about 20 years, and it’s been on your building for about 10. You have about ten years left before having to replace it.” The replacement might cost $20,000, but you might want to use 100% of the reserve funds or do an assessment.
But it’s not just the roof you must consider in your building. You should account for everything else, such as your carpet, elevators, and light fixtures. That way, you can holistically plan for your building to determine how much you should save each year. When items need to be repaired or replaced, you have the funding and a plan to do so.
How Much Does a Reserve Study Cost?
Reserve studies don’t come for free. Typically, the average depends on the size of the building and can cost anywhere between a thousand dollars to $10,000. They are expensive, but you can be sure the reports are worth it.
Not every condo association needs a reserve study because they might not have as many capital aspects. But it’s always suggested for good long-term planning. This can ensure that your building is safe, reliable, and protected.
The Boston HOA Guarantee
If you or anyone else you know is looking for more informative ways to proactively take care of your building and plan for the future from a cosmetic, functional, and financial standpoint, please think of Boston HOA Management.
