Whether you live in an HOA, are a developer or run an organization or municipality with many expensive components to maintain, odds are you have or will be asked to produce a Reserve Study. Typically demanded by state legislation, we see lenders and investors leaning more and more on the valuable insight these reports provide. If your organization is in need of a fresh Reserve Study, you've come to the right place!
Three Key Ingredients
Composing a Proper Reserve Study
Your component list identifies all of your organization's major assets which require regular observation, maintenance and eventually - replacement. Knowing what you are responsible for, as well as the current condition, age and ongoing costs for handling these assets is the first key ingredient to a valuable and valid Study. The criteria for determining which assets should be included is based on National Reserve Study Standards - an industry-wide, frequently reviewed and accepted standard for fiscal responsibility relative to Reservable Components.
Snapshot of Current Financial Condition
Once we know which assets are appropriate for Reserves and what their current condition and related costs are, we compare the total deteriorated value of those assets against the actual Reserve Balances your organization has saved. This ratio is known as your current "percent funded" and is the first of a few factors painting a picture of how financially prepared your organization is to cover the inevitable costs of maintenance.
Recommendation for Future Funding
After your current financial condition is understood, the final piece of your Reserve Study is your recommended funding plan. This will usually be given in two ways: 1) A plan to show you how to reach 100% funded levels by a target date and 2) A plan to show you how to maintain a specific percent funded range your board of directors has requested. This might be, for example, how to fund to keep the percent funded between 70% and 80%. While we're happy to show both plans, as Reserve Specialists, we do always officially recommend funding for 100% funded goals.